BILL NUMBER: SB 208	CHAPTERED
	BILL TEXT

	CHAPTER  714
	FILED WITH SECRETARY OF STATE  OCTOBER 19, 2010
	APPROVED BY GOVERNOR  OCTOBER 19, 2010
	PASSED THE SENATE  OCTOBER 7, 2010
	PASSED THE ASSEMBLY  OCTOBER 7, 2010
	AMENDED IN ASSEMBLY  OCTOBER 7, 2010
	AMENDED IN ASSEMBLY  AUGUST 2, 2010
	AMENDED IN ASSEMBLY  JUNE 22, 2010

INTRODUCED BY   Senators Steinberg and Alquist
   (Principal coauthor: Assembly Member John A. Perez)

                        FEBRUARY 23, 2009

   An act to amend Sections 14105.24, 14167.1, 14167.2, 14167.3,
14167.4, 14167.5, 14167.6, 14167.8, 14167.9, 14167.10, 14167.11,
14167.12, 14167.14, 14167.31, 14167.32, 14167.35, and 14167.354 of,
to amend and renumber and add Section 14182 of, and to add Sections
14089.07, 14132.275, 14166.252, 14182.1, 14182.15, 14182.2, 14182.3,
and 14182.4 to, the Welfare and Institutions Code, relating to
Medi-Cal, making an appropriation therefor, and declaring the urgency
thereof, to take effect immediately.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 208, Steinberg. Medi-Cal.
   Existing law provides for the Medi-Cal program, which is
administered by the State Department of Health Care Services and
under which qualified low-income persons receive health care
benefits. The Medi-Cal program is, in part, governed and funded by
federal Medicaid provisions.
   Under existing law, the department is authorized to contract for
the provision of Medi-Cal services through certain managed care
options, including the geographic managed care model. Under existing
law, Sacramento County provides, in part, Medi-Cal services through a
geographic managed care health plan.
   This bill would permit the Sacramento County Department of Health
and Human Services to establish a stakeholder advisory committee to
provide input to the department on the delivery of health care
services provided in the county, as specified. This bill would,
except under specified circumstances, permit the advisory committee
to request in writing and receive final reports submitted to the
department by any managed care health plan operating in Sacramento
County.
   Existing law provides that clinics and hospital outpatient
departments, except for emergency rooms, that are owned and operated
by Los Angeles County and participated in a specified Medicaid
demonstration project for Los Angeles County, shall be reimbursed
under a cost-based methodology, as specified, on and after July 1,
2005.
   This bill would provide that, to the extent permitted by federal
law and that federal financial participation is available, if the
department implements a Medi-Cal managed care expansion program that
includes beneficiaries who are seniors or persons with disabilities,
payments received by the clinics and outpatient departments described
above shall be equivalent to what otherwise would have been received
on a fee-for-service basis.
   Existing federal law provides for the federal Medicare Program,
which is a public health insurance program for persons 65 years of
age and older and specified persons with disabilities who are under
65 years of age.
   This bill would, to the extent that federal financial
participation is available, and pursuant to a demonstration project
or waiver of federal law, require the department to establish pilot
projects in up to 4 counties, as specified, to develop effective
health care models to provide services to persons who are dually
eligible under both the Medi-Cal and Medicare programs. This bill
would require the department to, not sooner than March 1, 2011,
identify health care models that may be included in a pilot project,
to develop a timeline and process for selecting, financing,
monitoring, and evaluating the pilot projects, and to provide this
timeline and process to certain committees of the Legislature.
   Existing law establishes the Medi-Cal Hospital/Uninsured Care
Demonstration Project Act, which revises hospital supplemental
payment methodologies under the Medi-Cal program in order to maximize
the use of federal funds consistent with federal Medicaid law and to
stabilize the distribution of funding for hospitals that provide
care to Medi-Cal beneficiaries and uninsured patients. This
demonstration project provides for funding, in supplementation of
Medi-Cal reimbursement, to various hospitals, including designated
public hospitals, nondesignated public hospitals, and private
hospitals, as defined, in accordance with certain provisions relating
to disproportionate share hospitals.
   This bill would provide that, in the event of a partial-year
extension of the demonstration project, the director shall have
discretion to determine allocations for the extension period, as
specified.
   Existing law, subject to federal approval, requires the department
to make supplemental payments for certain services, as specified, to
private hospitals, nondesignated public hospitals, and designated
public hospitals, as defined, for subject federal fiscal years, as
defined.
   This bill would, instead, require that the department make the
supplemental payments described above for subject fiscal years, as
defined. This bill would make various changes to the formulas used to
determine the amount of the supplemental payments to the hospitals.
   Existing law provides that no payments shall be made to a
converted, private or nondesignated hospital, for the subject federal
fiscal year in which the hospital becomes a converted hospital or
for subsequent federal fiscal years.
   This bill would, instead, provide that no payments shall be made
to a converted hospital, as described above, for the portion of the
subject fiscal year that begins October 1 and ends June 30, for the
subject fiscal year that includes the first day of the subject
federal fiscal year in which the hospital becomes a converted
hospital, and for all subsequent subject fiscal years.
   Existing law requires the director to seek federal approval to
allow payments to specified converted, nondesignated public hospitals
for the period beginning July 1, 2010, and ending December 31, 2010.

   This bill would, instead, require the director to seek federal
approval to allow these payments for the period beginning July 1,
2010, and ending June 30, 2011.
   Existing law requires that designated public hospitals be paid
direct grants in support of health care expenditures, as specified.
Under existing law, the aggregate amount of these grants for each
subject federal fiscal year shall be $295,000,000.
   This bill would, instead, provide that the aggregate amount of the
grants shall be $73,750,000 for each subject fiscal quarter, as
defined.
   Existing law requires the department to increase capitation
payments to Medi-Cal managed health care plans and to increase
payments to mental health plans, for specified subject federal fiscal
years. Under existing law, the aggregate amount of increased
capitation payments for a federal fiscal year shall be $729,829,205
multiplied by the percentage of the subject federal fiscal year for
which federal approval is obtained, as specified.
   This bill would, instead, provide that the increased capitation
payments to Medi-Cal managed health care plans shall be made for
subject fiscal years, as defined, and that the aggregate amount for
all subject fiscal years shall be $1,277,201,209, or the maximum
amount for which federal financial participation is available,
whichever is lower. This bill would also provide that the aggregate
amount of the increased payments to mental health plans for a subject
fiscal quarter shall be the total of the individual hospital acute
psychiatric supplemental payment amounts for all hospitals for which
federal financial participation is available.
   Existing law, subject to federal approval, also imposes, as a
condition of participation in state-funded health insurance programs
other than the Medi-Cal program, a quality assurance fee, as
specified, on certain general acute care hospitals through and
including December 31, 2010. Existing law creates the Hospital
Quality Assurance Revenue Fund in the State Treasury and requires
that the money collected from the quality assurance fee be deposited
into the fund. Existing law provides that the moneys in the fund
shall, upon appropriation by the Legislature, be available only for
certain purposes, in a specified order of priority.
   This bill would delete the provision that specifies that the fee
shall be imposed only as a condition of participation in state-funded
health insurance programs. This bill would also modify the order of
priority of the purposes for which the money in the Hospital Quality
Assurance Revenue Fund shall be appropriated.
   Existing law requires the department to seek a demonstration
project or federal waiver of Medicaid law to implement specified
objectives, which may include better care coordination for seniors
and persons with disabilities and children with special health care
needs.
   This bill would, in this regard, provide that to the extent the
provisions under the Medi-Cal Hospital/Uninsured Care Demonstration
Project Act do not conflict with the provisions of, or the terms and
conditions of, the above-described demonstration project, the
provisions of the Medi-Cal Hospital/Uninsured Care Demonstration
Project Act shall apply.
   This bill would, in furtherance of the waiver or demonstration
project and to the extent that federal financial participation is
available, permit the department to require seniors and persons with
disabilities who do not have other health coverage to be assigned as
mandatory enrollees into new and existing managed care health plans,
as specified. This bill would provide that enrollment of seniors and
persons with disabilities shall be accomplished using a phased-in
process and shall not commence until necessary federal approvals have
been acquired, or until June 1, 2011, whichever is later. The bill
would impose various requirements upon managed care health plans
participating in the demonstration project.
   This bill would, beginning January 1, 2012, require managed care
health plans to comply with quality submission standards developed by
the department as prescribed.
   This bill would provide that, in implementing the provision
described above that would require seniors and persons with
disabilities who do not have other health coverage to be assigned as
mandatory enrollees into new or existing managed care health plans, a
public entity, as defined, may, if specified requirements are met,
elect to, on a voluntary basis, participate in intergovernmental
transfers to be used solely as the nonfederal share of Medi-Cal
payments to managed care health plans for the provision of services
to Medi-Cal beneficiaries.
   This bill would require, to the extent authorized under a federal
waiver or demonstration project described above, the department to
develop a program of investment, improvement, and incentive payments
for designated public hospitals to encourage and incentivize delivery
system transformation and innovation in preparation for the
implementation of federal health care reform. This bill would
establish the Public Hospital Investment, Improvement, and Incentive
Fund in the State Treasury, which shall consist of any moneys
transferred by a county, other political subdivision of the state, or
other governmental entity in the state for deposit in the fund. The
bill would provide that the fund shall be continuously appropriated
to the department to be used as the source for the nonfederal share
of investment, improvement, and incentive payments to participating
designated public hospitals, as specified.
   Existing law, the Robert W. Crown California Children's Services
Act, requires the department and each county to administer the
California Children Services (CCS) program for treatment services for
persons under 21 years of age diagnosed with severe chronic disease
or severe physical limitations, as specified.
   This bill also would, in furtherance of the waiver or
demonstration project, require the Director of Health Care Services
to establish, by January 1, 2012, models of organized health care
delivery systems, as specified, for children eligible for services
under the CCS program. This bill would provide that, to the extent
permitted by federal law, the department may require eligible
individuals to enroll in these models. This bill would also permit
the Managed Risk Medical Insurance Board to elect, with the consent
of the director, to permit children enrolled in the Healthy Families
Program who are eligible for CCS services to enroll in these
organized health care delivery models.
   This bill would become operative only if AB 342 of the 2009-10
Regular Session of the Legislature is enacted.
   This bill would declare that it is to take effect immediately as
an urgency statute.
   Appropriation: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 14089.07 is added to the Welfare and
Institutions Code, to read:
   14089.07.  (a) The Sacramento County Department of Health and
Human Services may establish a stakeholder advisory committee to
provide input on the delivery of health care services provided in the
county pursuant to this article, Section 14182, and Part 3.6
(commencing with Section 15909). The advisory committee shall
include, but not be limited to, Medi-Cal beneficiaries, patient
representatives, health care providers, and representatives of
Medi-Cal managed care health plans.
   (b) The advisory committee may submit written input to the State
Department of Health Care Services regarding policies that improve
coordination with traditional and safety net providers, enhance the
capacity of the county's health care delivery system, and improve
health care services and health outcomes.
   (c) The advisory committee may request, in writing, and receive
final reports submitted to the department by any managed care health
plan operating in Sacramento County as long as the report is not
exempt from disclosure pursuant to Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code, or any
other contractual, statutory, or legal exemption, or privilege. The
advisory committee may review and provide written comments to the
department on these reports, that may include issues such as
evaluation of access, quality, and consumer protections.
   (d)  No state General Fund moneys shall be used to fund advisory
committee costs, nor to fund any related administrative costs
incurred by the county.
  SEC. 2.  Section 14105.24 of the Welfare and Institutions Code is
amended to read:
   14105.24.  (a) Clinics and hospital outpatient departments, except
for emergency rooms, owned or operated by Los Angeles County that
participated in the California Section 1115 Medicaid Demonstration
Project for Los Angeles County (No. 11-W-00076/9) and received 100
percent cost-based reimbursement pursuant to the Special Terms and
Conditions of that waiver shall continue to be reimbursed under a
cost-based methodology on and after July 1, 2005.
   (b) Reimbursement to clinics and hospitals described in
subdivision (a) shall be at 100 percent of reasonable and allowable
costs for Medi-Cal services rendered to Medi-Cal beneficiaries.
Reasonable and allowable costs shall be determined in accordance with
applicable cost-based reimbursement provisions of the following
regulations and publications:
   (1) The Medicare reimbursement methodology as specified at
Sections 405.2460 to 405.2470, inclusive, of Title 42 of the Code of
Federal Regulations, together with applicable definitions in Subpart
X of Part 405 of Title 42 of the Code of Federal Regulations to the
extent those definitions are applied by the department in connection
with payments to federally qualified health centers in California.
   (2) Cost reimbursement principles outlined in Part 413 (commencing
with Section 413.1) of Title 42 of the Code of Federal Regulations.
In the event of a conflict between the provisions of Part 405 and
Part 413, the provisions of Part 405 shall govern.
   (3) "Cost Principles for State, Local, and Indian Tribe
Governments" (OMB Circular A-87).
   (4) "Rural Health and FQHC Manual" (CMS Publication 27).
   (5) Subdivision (e) of Section 14087.325 and any implementing
regulations.
   (c) The methodology for reimbursement adopted by the state to
comply with Section 1396a(aa) of Title 42 of the United States Code
shall not be applicable to clinics and hospitals that are paid
pursuant to this section.
   (d) This section shall be implemented on the effective date
established by the federal Centers for Medicare and Medicaid Services
for an amendment to the California Medicaid State Plan that approves
the cost-based reimbursement methodology for the clinics and
hospitals described in subdivision (b).
   (e) (1) Payments received by clinics and hospital outpatient
departments described in subdivision (a), for services rendered to
populations described in Section 14182, shall be equivalent to what
otherwise would have been received under this section on a
fee-for-service basis.
   (2) This subdivision shall be implemented only to the extent
permitted under federal law and when federal financial participation
is available.
   (f) Notwithstanding subdivision (a) of Section 14105, and the
rulemaking provisions of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement and administer the cost-based rates of
reimbursement described in this section by means of provider
bulletins or manuals, or similar instructions.
  SEC. 3.  Section 14132.275 is added to the Welfare and Institutions
Code, to read:
   14132.275.  (a) The department shall seek federal approval to
establish pilot projects described in this section pursuant to a
Medicare or a Medicaid demonstration project or waiver, or a
combination thereof. Under a Medicare demonstration, the department
may operate the Medicare component of a pilot project as a delegated
Medicare benefit administrator, and may enter into financing
arrangements with the federal Centers for Medicare and Medicaid
Services to share in any Medicare program savings generated by the
operation of any pilot project.
   (b) After federal approval is obtained, the department shall
establish pilot projects that enable dual eligibles to receive a
continuum of services, and that maximize the coordination of benefits
between the Medi-Cal and Medicare programs and access to the
continuum of services needed. The purpose of the pilot projects is to
develop effective health care models that integrate services
authorized under the federal Medicaid Program (Title XIX of the
federal Social Security Act (42 U.S.C. Sec. 1396 et seq.)) and the
federal Medicare Program (Title XVIII of the federal Social Security
Act (42 U.S.C. Sec. 1395 et seq.)). These pilot projects may also
include additional services as approved through a demonstration
project or waiver, or a combination thereof.
   (c) Not sooner than March 1, 2011, the department shall identify
health care models that may be included in a pilot project, shall
develop a timeline and process for selecting, financing, monitoring,
and evaluating these pilot projects, and shall provide this timeline
and process to the appropriate fiscal and policy committees of the
Legislature. The department may implement these pilot projects in
phases.
   (d) Goals for the pilot projects shall include all of the
following:
   (1) Coordinating Medi-Cal benefits, Medicare benefits, or both,
across health care settings and improving continuity of acute care,
long-term care, and home- and community-based services.
   (2) Coordinating access to acute and long-term care services for
dual eligibles.
   (3) Maximizing the ability of dual eligibles to remain in their
homes and communities with appropriate services and supports in lieu
of institutional care.
   (4) Increasing the availability of and access to home- and
community-based alternatives.
   (e) Pilot projects shall be established in up to four counties,
and shall include at least one county that provides Medi-Cal services
via a two-plan model pursuant to Article 2.7 (commencing with
Section 14087.3) and at least one county that provides Medi-Cal
services under a county organized health system pursuant to Article
2.8 (commencing with Section 14087.5). In determining the counties in
which to establish a pilot project, the director shall consider the
following:
   (1) Local support for integrating medical care, long-term care,
and home- and community-based services networks.
   (2) A local stakeholder process that includes health plans,
providers, community programs, consumers, and other interested
stakeholders in the development, implementation, and continued
operation of the pilot project.
   (f) The director may enter into exclusive or nonexclusive
contracts on a bid or negotiated basis and may amend existing managed
care contracts to provide or arrange for services provided under
this section. Contracts entered into or amended pursuant to this
section shall be exempt from the provisions of Chapter 2 (commencing
with Section 10290) of Part 2 of Division 2 of the Public Contract
Code and Chapter 6 (commencing with Section 14825) of Part 5.5 of
Division 3 of the Government Code.
   (g) Services under Section 14132.95, 14132.952, or Article 7
(commencing with Section 12300) of Chapter 3 that are provided under
the pilot projects established by this section shall be provided
through direct hiring of personnel, contract, or establishment of a
public authority or nonprofit consortium, in accordance with, and
subject to, the requirements of Section 12302 or 12301.6, as
applicable.
   (h) Notwithstanding any other provision of state law, the
department may require that dual eligibles be assigned as mandatory
enrollees into managed care plans established or expanded as part of
a pilot project established under this section. Mandatory enrollment
in managed care for dual eligibles shall be applicable to the
beneficiary's Medi-Cal benefits only. Dual eligibles shall have the
option to enroll in a Medicare Advantage special needs plan (SNP)
offered by the managed care plan established or expanded as part of a
pilot project established pursuant to (e). To the extent that
mandatory enrollment is required, any requirement of the department
and the health plans, and any requirement of continuity of care
protections for enrollees, as specified in Section 14182, shall be
applicable to this section. Dual eligibles shall have the option to
forgo receiving Medicare benefits under a pilot project. Nothing in
this section shall be interpreted to reduce benefits otherwise
available under the Medi-Cal program or the Medicare Program.
   (i) For purposes of this section, a "dual eligible" means an
individual who is simultaneously eligible for full scope benefits
under Medi-Cal and the federal Medicare Program.
   (j) Persons meeting requirements for Program of All-Inclusive Care
for the Elderly (PACE) pursuant to Chapter 8.75 (commencing with
Section 14590), may select a PACE plan if one is available in that
county.
   (k) Notwithstanding Section 10231.5 of the Government Code, the
department shall conduct an evaluation to assess outcomes and the
experience of dual eligibles in these pilot projects and shall
provide a report to the Legislature after the first full year of
pilot operation, and annually thereafter. A report submitted to the
Legislature pursuant to this subdivision shall be submitted in
compliance with Section 9795 of the Government Code. The department
shall consult with stakeholders regarding the scope and structure of
the evaluation.
   (l) This section shall be implemented only if and to the extent
that federal financial participation or funding is available to
establish these pilot projects.
   (m) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement, interpret, or make specific this section
and any applicable federal waivers and state plan amendments by means
of all-county letters, plan letters, plan or provider bulletins, or
similar instructions, without taking regulatory action. Prior to
issuing any letter or similar instrument authorized pursuant to this
section, the department shall notify and consult with stakeholders,
including advocates, providers, and beneficiaries. The department
shall notify the appropriate policy and fiscal committees of the
Legislature of its intent to issue instructions under this section at
least five days in advance of the issuance.
  SEC. 4.  Section 14166.252 is added to the Welfare and Institutions
Code, to read:
   14166.252.  (a) In the event of a partial year extension of a
demonstration project pursuant to this article, the director shall
have discretion to determine allocations for the extension period on
either an annual or partial year basis, consistent with any
requirements in the letter from the federal Centers for Medicare and
Medicaid Services granting the extension.
   (b) This section shall be implemented only to the extent federal
financial participation is available and is not jeopardized.
  SEC. 5.  Section 14167.1 of the Welfare and Institutions Code is
amended to read:
   14167.1.  For purposes of this article, the following definitions
shall apply:
   (a) "Acute psychiatric days" means the total number of Short-Doyle
administrative days, Short-Doyle acute care days, acute psychiatric
administrative days, and acute psychiatric acute days identified in
the Final Medi-Cal Utilization Statistics for the 2008-09 state
fiscal year as calculated by the department on September 15, 2008.
   (b) "Converted hospital" means a private hospital that becomes a
designated public hospital or a nondesignated public hospital after
the implementation date, a nondesignated public hospital that becomes
a private hospital or a designated public hospital after the
implementation date, or a designated public hospital that becomes a
private hospital or a nondesignated public hospital after the
implementation date.
   (c) "Current Section 1115 Waiver" means California's Medi-Cal
Hospital/Uninsured Care Section 1115 Waiver Demonstration in effect
on the effective date of the article.
   (d) "Designated public hospital" shall have the meaning given in
subdivision (d) of Section 14166.1 as that section may be amended
from time to time.
   (e) "General acute care days" means the total number of Medi-Cal
general acute care days paid by the department to a hospital in the
2008 calendar year, as reflected in the state paid claims files on
July 10, 2009.
   (f) "High acuity days" means Medi-Cal coronary care unit days,
pediatric intensive care unit days, intensive care unit days,
neonatal intensive care unit days, and burn unit days paid by the
department during the 2008 calendar year, as reflected in the state
paid claims files on July 10, 2009.
   (g) "Hospital inpatient services" means all services covered under
Medi-Cal and furnished by hospitals to patients who are admitted as
hospital inpatients and reimbursed on a fee-for-service basis by the
department directly or through its fiscal intermediary. Hospital
inpatient services include outpatient services furnished by a
hospital to a patient who is admitted to that hospital within 24
hours of the provision of the outpatient services that are related to
the condition for which the patient is admitted. Hospital inpatient
services do not include services for which a managed health care plan
is financially responsible.
   (h) "Hospital outpatient services" means all services covered
under Medi-Cal furnished by hospitals to patients who are registered
as hospital outpatients and reimbursed by the department on a
fee-for-service basis directly or through its fiscal intermediary.
Hospital outpatient services do not include services for which a
managed health care plan is financially responsible, or services
rendered by a hospital-based federally qualified health center for
which reimbursement is received pursuant to Section 14132.100.
   (i) (1) "Implementation date" means the latest effective date of
all federal approvals or waivers necessary for the implementation of
this article and Article 5.22 (commencing with Section 14167.31),
including, but not limited to, any approvals on amendments to
contracts between the department and managed health care plans or
mental health plans necessary for the implementation of this article.
The effective date of a federal approval or waiver shall be the
earlier of the stated effective date or the first day of the first
quarter to which the computation of the payments or fee under the
federal approval or waiver is applicable, which may be prior to the
date that the federal approval or waiver is granted or the applicable
contract is amended.
   (2) If federal approval is sought initially for only the 2008-09
federal fiscal year and separately secured for subsequent federal
fiscal years, the implementation date for the 2008-09 federal fiscal
year shall occur when all necessary federal approvals have been
secured for that federal fiscal year.
   (j) "Individual hospital acute psychiatric supplemental payment"
means the total amount of acute psychiatric hospital supplemental
payments to a subject hospital for a quarter for which the
supplemental payments are made. The "individual hospital acute
psychiatric supplemental payment" shall be calculated for subject
hospitals by multiplying the number of acute psychiatric days for the
individual hospital for which a mental health plan was financially
responsible by four hundred eighty-five dollars ($485) and dividing
the result by 4.
   (k) (1) "Managed health care plan" means a health care delivery
system that manages the provision of health care and receives prepaid
capitated payments from the state in return for providing services
to Medi-Cal beneficiaries.
   (2) (A) Managed health care plans include county organized health
systems and entities contracting with the department to provide
services pursuant to two-plan models and geographic managed care.
Entities providing these services contract with the department
pursuant to any of the following:
   (i) Article 2.7 (commencing with Section 14087.3).
   (ii) Article 2.8 (commencing with Section 14087.5).
   (iii) Article 2.81 (commencing with Section 14087.96).
   (iv) Article 2.91 (commencing with Section 14089).
   (B) Managed health care plans do not include any of the following:

   (i) Mental health plan contracting to provide mental health care
for Medi-Cal beneficiaries pursuant to Part 2.5 (commencing with
Section 5775) of Division 5.
   (ii) Health plan not covering inpatient services such as primary
care case management plans operating pursuant to Section 14088.85.
   (iii) Long-Term Care Demonstration Projects for All-Inclusive Care
for the Elderly operating pursuant to Chapter 8.75 (commencing with
Section 14590).
   (l) "Medi-Cal managed care days" means the total number of general
acute care days, including well baby days, listed for the county
organized health system and prepaid health plans identified in the
Final Medi-Cal Utilization Statistics for the 2008-09 state fiscal
year, as calculated by the department on September 15, 2008, except
that the general acute care days, including well baby days, for the
Santa Barbara Health Care Initiative shall be derived from the Final
Medi-Cal Utilization Statistics for the 2007-08 state fiscal year.
   (m) "Medicaid inpatient utilization rate" means Medicaid inpatient
utilization rate as defined in Section 1396r-4 of Title 42 of the
United States Code and as set forth in the final disproportionate
share hospital eligibility list for the 2008-09 state fiscal year
released by the department on October 22, 2008.
   (n) "Mental health plan" means a mental health plan that contracts
with the State Department of Mental Health to furnish or arrange for
the provision of mental health services to Medi-Cal beneficiaries
pursuant to Part 2.5 (commencing with Section 5775) of Division 5.
   (o) "New hospital" means a hospital that was not in operation
under current or prior ownership as a private hospital, a
nondesignated public hospital, or a designated public hospital for
any portion of the 2008-09 state fiscal year.
   (p) "Nondesignated public hospital" means either of the following:

   (1) A public hospital that is licensed under subdivision (a) of
Section 1250 of the Health and Safety Code, is not designated as a
specialty hospital in the hospital's annual financial disclosure
report for the hospital's latest fiscal year ending in 2007, and
satisfies the definition in paragraph (25) of subdivision (a) of
Section 14105.98, excluding designated public hospitals.
   (2) A tax-exempt nonprofit hospital that is licensed under
subdivision (a) of Section 1250 of the Health and Safety Code, is not
designated as a specialty hospital in the hospital's annual
financial disclosure report for the hospital's latest fiscal year
ending in 2007, is operating a hospital owned by a local health care
district, and is affiliated with the health care district hospital
owner by means of the district's status as the nonprofit corporation'
s sole corporate member.
   (q) "Outpatient base amount" means the total amount of payments
for hospital outpatient services made to a hospital in the 2007
calendar year, as reflected in state paid claims files on January 26,
2008.
   (r) "Private hospital" means a hospital that meets all of the
following conditions:
   (1) Is licensed pursuant to subdivision (a) of Section 1250 of the
Health and Safety Code.
   (2) Is in the Charitable Research Hospital peer group, as set
forth in the 1991 Hospital Peer Grouping Report published by the
department, or is not designated as a specialty hospital in the
hospital's Office of Statewide Health Planning and Development Annual
Financial Disclosure Report for the hospital's latest fiscal year
ending in 2007.
   (3) Does not satisfy the Medicare criteria to be classified as a
long-term care hospital.
   (4) Is a nonpublic hospital, nonpublic converted hospital, or
converted hospital as those terms are defined in paragraphs (26) to
(28), inclusive, respectively, of subdivision (a) of Section
14105.98.
   (s) "Subject federal fiscal year" means a federal fiscal year that
ends after the implementation date and begins before December 31,
2010.
   (t) "Subject fiscal quarter" means a fiscal quarter beginning on
or after the implementation date and ending before January 1, 2011.
   (u) "Subject fiscal year" means a state fiscal year that ends
after the implementation date and begins before December 31, 2010.
   (v) "Subject hospital" shall mean a hospital that meets all of the
following conditions:
   (1) Is licensed pursuant to subdivision (a) of Section 1250 of the
Health and Safety Code.
   (2) Is in the Charitable Research Hospital peer group, as set
forth in the 1991 Hospital Peer Grouping Report published by the
department, or is not designated as a specialty hospital in the
hospital's Office of Statewide Health Planning and Development Annual
Financial Disclosure Report for the hospital's latest fiscal year
ending in 2007.
   (3) Does not satisfy the Medicare criteria to be classified as a
long-term care hospital.
   (w) "Subject month" means a calendar month beginning on or after
the implementation date and ending before January 1, 2011.
   (x) "Upper payment limit" means a federal upper payment limit on
the amount of the Medicaid payment for which federal financial
participation is available for a class of service and a class of
health care providers, as specified in Part 447 of Title 42 of the
Code of Federal Regulations.
  SEC. 6.  Section 14167.2 of the Welfare and Institutions Code is
amended to read:
   14167.2.  (a) Private hospitals shall be paid supplemental amounts
for the provision of hospital outpatient services as set forth in
this section. The supplemental amounts shall be in addition to any
other amounts payable to hospitals with respect to those services and
shall not affect any other payments to hospitals.
   (b) Except as set forth in subdivisions (e) and (f), each private
hospital shall be paid an amount for each subject fiscal year equal
to a percentage of the hospital's outpatient base amount. The
percentage shall be the same for each hospital for a subject fiscal
year and shall result in payments to hospitals that equal the
applicable federal upper payment limit.
   (c) In the event federal financial participation for a subject
fiscal year is not available for all of the supplemental amounts
payable to private hospitals under subdivision (b) due to the
application of a federal upper limit or for any other reason, both of
the following shall apply:
   (1) The total amount payable to private hospitals under
subdivision (b) for the subject fiscal year shall be reduced to the
amount for which federal financial participation is available.
   (2) The amount payable under subdivision (b) to each private
hospital for the subject fiscal year shall be equal to the amount
computed under subdivision (b) multiplied by the ratio of the total
amount for which federal financial participation is available to the
total amount computed under subdivision (b).
   (d) The supplemental amounts set forth in this section are
inclusive of federal financial participation.
   (e) No payments shall be made under this section to a new
hospital.
   (f) No payments shall be made under this section to a converted
hospital for the portion of the subject fiscal year that begins on
October 1 and ends on June 30 for the subject fiscal year that
includes the first day of the subject federal fiscal year in which
the hospital becomes a converted hospital, and for all subsequent
subject fiscal years. In the event of a conflict between the
provisions of this subdivision and the terms of a state plan
amendment required for the receipt of approval by the federal Centers
for Medicare and Medicaid Services, the state plan amendment shall
control.
   (g) In the event that the amounts payable as calculated under
subdivision (b) for the 2008-09 subject fiscal year are reduced by
the operation of subdivision (c) and the ratio for the 2008-09
subject fiscal year described in paragraph (2) of subdivision (c) is
less than 0.25, the difference between 25 percent of the amounts
payable as calculated under subdivision (b) and the amounts payable
after the application of subdivision (c) shall be added to the
supplemental payments for each private hospital calculated under
subdivision (b) for the 2009-10 subject fiscal year.
   (h) In the event that the amounts payable as calculated under
subdivision (b) for the 2009-10 subject fiscal year, including any
carryover amounts determined under subdivision (g), are reduced by
the operation of subdivision (c), the difference between the amounts
payable as calculated under subdivision (b), including any carryover
amounts, and the amounts payable after the application of subdivision
(c) shall be added to the supplemental payments for each private
hospital calculated under subdivision (b) for the 2010-11 subject
fiscal year.
  SEC. 7.  Section 14167.3 of the Welfare and Institutions Code is
amended to read:
   14167.3.  (a) Private hospitals shall be paid supplemental amounts
for the provision of hospital inpatient services and subacute
services as set forth in this section. The supplemental amounts shall
be in addition to any other amounts payable to hospitals with
respect to those services and shall not affect any other payments to
hospitals.
                                                           (b) Except
as set forth in subdivisions (g) and (h), each private hospital
shall be paid the following amounts as applicable for the provision
of hospital inpatient services for each subject fiscal year:
   (1) Six hundred forty dollars and forty-six cents ($640.46)
multiplied by the hospital's general acute care days.
   (2) Four hundred eighty-five dollars ($485) multiplied by the
hospital's acute psychiatric days that were paid directly by the
department and were not the financial responsibility of a mental
health plan.
   (3) One thousand three hundred fifty dollars ($1,350) multiplied
by the number of the hospital's high acuity days if the hospital's
Medicaid inpatient utilization rate is less than 41.1 percent and
greater than 5 percent and at least 5 percent of the hospital's
general acute care days are high acuity days. This amount shall be in
addition to the amounts specified in paragraphs (1) and (2).
   (4) One thousand three hundred fifty dollars ($1,350) multiplied
by the number of the hospital's high acuity days if the hospital
qualifies to receive the amount set forth in paragraph (3) and has
been designated as a Level I, Level II, Adult/Ped Level I, or
Adult/Ped Level II trauma center by the emergency medical services
authority established pursuant to Section 1797.1 of the Health and
Safety Code. This amount shall be in addition to the amounts
specified in paragraphs (1), (2), and (3).
   (c) A private hospital that provides Medi-Cal subacute services
during a subject fiscal year and has a Medicaid inpatient utilization
rate that is greater than 5.0 percent and less than 41.1 percent
shall be paid for the provision of subacute services during each
subject fiscal year a supplemental amount equal to 40 percent of the
Medi-Cal subacute payments made to the hospital during the 2008
calendar year.
   (d) (1) In the event federal financial participation for a subject
fiscal year is not available for all of the supplemental amounts
payable to private hospitals under subdivision (b) due to the
application of a federal limit or for any other reason, both of the
following shall apply:
   (A) The total amount payable to private hospitals under
subdivision (b) for the subject fiscal year shall be reduced to
reflect the amount for which federal financial participation is
available.
   (B) The amount payable under subdivision (b) to each private
hospital for the subject fiscal year shall be equal to the amount
computed under subdivision (b) multiplied by the ratio of the total
amount for which federal financial participation is available to the
total amount computed under subdivision (b).
   (2) In the event federal financial participation for a subject
fiscal year is not available for all of the supplemental amounts
payable to private hospitals under subdivision (c) due to the
application of a federal upper limit or for any other reason, both of
the following shall apply:
   (A) The total amount payable to private hospitals under
subdivision (c) for the subject fiscal year shall be reduced to
reflect the amount for which federal financial participation is
available.
   (B) The amount payable under subdivision (c) to each private
hospital for the subject fiscal year shall be equal to the amount
computed under subdivision (c) multiplied by the ratio of the total
amount for which federal financial participation is available to the
total amount computed under subdivision (c).
   (e) In the event the amount otherwise payable to a hospital under
this section for a subject fiscal year exceeds the amount for which
federal financial participation is available for that hospital, the
amount due to the hospital for that fiscal year shall be reduced to
the amount for which federal financial participation is available.
   (f) The amounts set forth in this section are inclusive of federal
financial participation.
   (g) No payments shall be made under this section to a new
hospital.
   (h) No payments shall be made under this section to a converted
hospital for the portion of the subject fiscal year that begins on
October 1 and ends on June 30 for the subject fiscal year that
includes the first day of the subject federal fiscal year in which
the hospital becomes a converted hospital, and for all subsequent
subject fiscal years. In the event of a conflict between the
provisions of this subdivision and the terms of a state plan
amendment required for receipt of approval by the federal Centers for
Medicare and Medicaid Services, the state plan amendment shall
control.
   (i) In the event that the amounts payable as calculated under
subdivision (b) for the 2008-09 subject fiscal year are reduced by
the operation of subdivision (d) and the ratio for the 2008-09
subject fiscal year described in subparagraph (B) of paragraph (1) of
subdivision (d) is less than 0.25, the difference between 25 percent
of the amounts payable as calculated under subdivision (b) and the
amounts payable after the application of subdivision (d) shall be
added to the supplemental payments for each private hospital
calculated under subdivision (b) for the 2009-10 subject fiscal year.

   (j) In the event that the amounts payable as calculated under
subdivision (b) for the 2009-10 subject fiscal year, including any
carryover amounts determined under subdivision (i), are reduced by
the operation of subdivision (d), the difference between the amounts
payable as calculated under subdivision (b), including any carryover
amounts, and the amounts payable after the application of subdivision
(d) shall be added to the supplemental payments for each private
hospital calculated under subdivision (b) for the 2010-11 subject
fiscal year.
   (k) In the event that the amounts payable as calculated under
subdivision (c) for the 2008-09 subject fiscal year are reduced by
the operation of subdivision (d) and the ratio for the 2008-09
subject fiscal year described in subparagraph (B) of paragraph (2) of
subdivision (d) is less than 0.25, the difference between 25 percent
of the amounts payable as calculated under subdivision (c) and the
amounts payable after the application of subdivision (d) shall be
added to the supplemental payments for each private hospital
calculated under subdivision (c) for the 2009-10 subject fiscal year.

   (l) In the event that the amounts payable as calculated under
subdivision (c) for the 2009-10 subject fiscal year, including any
carryover amounts determined under subdivision (k), are reduced by
the operation of subdivision (d), the difference between the amounts
payable as calculated under subdivision (c), including any carryover
amounts, and the amounts payable after the application of subdivision
(d) shall be added to the supplemental payments for each private
hospital calculated under subdivision (c) for the 2010-11 subject
fiscal year.
  SEC. 8.  Section 14167.4 of the Welfare and Institutions Code is
amended to read:
   14167.4.  (a) Nondesignated public hospitals shall be paid
supplemental amounts for the provision of hospital inpatient services
as set forth in this section. The supplemental amounts shall be in
addition to any other amounts payable to hospitals with respect to
those services and shall not affect any other payments to hospitals.
   (b) Except as set forth in subdivisions (f) and (g), each
nondesignated public hospital shall be paid the following amounts for
each subject fiscal year:
   (1) Two hundred eighteen dollars and eighty-two cents ($218.82)
multiplied by the hospital's general acute care days.
   (2) Four hundred eighty-five dollars ($485) multiplied by the
hospital's acute psychiatric days that were paid directly by the
department and were not the financial responsibility of a mental
health plan.
   (c) In the event federal financial participation for a subject
fiscal year is not available for all of the supplemental amounts
payable to nondesignated public hospitals under subdivision (b) due
to the application of a federal upper payment limit or for any other
reason, both of the following shall apply:
   (1) The total amount payable to nondesignated public hospitals
under subdivision (b) for the subject fiscal year shall be reduced to
the amount for which federal financial participation is available.
   (2) The amount payable under subdivision (b) to each nondesignated
public hospital for the subject fiscal year shall be equal to the
amount computed under subdivision (b) multiplied by the ratio of the
total amount for which federal financial participation is available
to the total amount computed under subdivision (b).
   (d) In the event the amount otherwise payable to a hospital under
this section for a subject fiscal year exceeds the amount for which
federal financial participation is available for that hospital, the
amount due to the hospital for that federal fiscal year shall be
reduced to the amount for which federal financial participation is
available.
   (e) The amounts set forth in this section are inclusive of federal
financial participation.
   (f) No payments shall be made under this section to a new
hospital.
   (g) (1) No payments shall be made under this section to a
converted hospital for the portion of the subject fiscal year that
begins on October 1 and ends on June 30 for the subject fiscal year
that includes the first day of the subject federal fiscal year in
which the hospital becomes a converted hospital, and for all
subsequent subject fiscal years. In the event of a conflict between
the provisions of this subdivision and the terms of a state plan
amendment required for receipt of approval by the federal Centers for
Medicare and Medicaid Services, the state plan amendment shall
control.
   (2) Notwithstanding paragraph (1), the director shall seek federal
approval to allow payments to be made under this section for the
period beginning July 1, 2010, and ending June 30, 2011, to a
converted hospital which is a hospital described in paragraph (2) of
subdivision (p) of Section 14167.1, and shall make payments under
this section consistent with any approvals, subject to all of the
following:
   (A) Federal approval shall be sought after all final federal
approvals necessary to implement this article and Article 5.22
(commencing with Section 14167.31) are received by the department.
   (B) The director shall have determined prior to seeking federal
approval that obtaining federal approval and implementing the
payments described in this paragraph will not jeopardize the
implementation of this article or Article 5.22 (commencing with
Section 14167.31), or delay any payments to hospitals and managed
health care plans under this article or Article 5.22 (commencing with
Section 14167.31), or the collection of the quality assurance fee
from hospitals under Article 5.22 (commencing with Section 14167.31),
beyond December 31, 2010.
   (C) The director shall withdraw any request for federal approval
made under this paragraph if, after submitting the request, the
director has determined that obtaining federal approval and
implementing the payments described in this paragraph will jeopardize
the implementation of this article or Article 5.22 (commencing with
Section 14167.31) or delay any payments to hospitals and managed
health care plans under this article or Article 5.22, (commencing
with Section 14167.31) or the collection of the quality assurance fee
from hospitals under Article 5.22, (commencing with Section
14167.31) beyond December 31, 2010.
   (h) In the event that the amounts payable as calculated under
subdivision (b) for the 2008-09 subject fiscal year are reduced by
the operation of subdivision (c) and the ratio for the 2008-09
subject fiscal year described in paragraph (2) of subdivision (c) is
less than 0.25, the difference between 25 percent of the amounts
payable as calculated under subdivision (b) and the amounts payable
after the application of subdivision (c) shall be added to the
supplemental payments for each nondesignated public hospital
calculated under subdivision (b) for the 2009-10 subject fiscal year.

   (i) In the event that the amounts payable as calculated under
subdivision (b) for the 2009-10 subject fiscal year, including any
carryover amounts determined under subdivision (h), are reduced by
the operation of subdivision (c), the difference between the amounts
payable as calculated under subdivision (b), including any carryover
amounts, and the amounts payable after the application of subdivision
(c) shall be added to the supplemental payments for each
nondesignated public hospital calculated under subdivision (b) for
the 2010-11 subject fiscal year.
  SEC. 9.  Section 14167.5 of the Welfare and Institutions Code is
amended to read:
   14167.5.  (a) Designated public hospitals shall be paid direct
grants in support of health care expenditures, which shall not
constitute Medi-Cal payments, and which shall be funded by the
quality assurance fee set forth in Article 5.22 (commencing with
Section 14167.31). The aggregate amount of the grants to designated
public hospitals for each subject fiscal quarter shall be
seventy-three million seven hundred and fifty thousand dollars
($73,750,000).
   (b) The director shall allocate the amount specified in
subdivision (a) among the designated public hospitals in accordance
with this subdivision. In determining the allocation, the director
shall rely on data from the Interim Hospital Payment Rate Workbooks.
For purposes of this section, "Interim Hospital Payment Rate Workbook"
means the Interim Hospital Payment Rate Workbook, developed by the
department and approved by the federal Centers for Medicare and
Medicaid Services for use in connection with the Medi-Cal
Hospital/Uninsured Care 1115 Waiver Demonstration, as submitted by
each designated public hospital, or the governmental entity with
which the hospital is affiliated, on or around June 2009 for the
period of July 1, 2007, to June 30, 2008, inclusive.
   (1) Each designated public hospital's share of 80 percent of the
amount specified in subdivision (a) shall be determined by applying a
fraction, the numerator of which is the certified public
expenditures reported by the designated public hospital as allowable
Medi-Cal inpatient expenditures on Schedule 2.1, Column 5, Step 5 of
the Interim Hospital Payment Rate Workbook, and the denominator of
which is the total amount of certified public expenditures reported
as allowable Medi-Cal inpatient expenditures by all designated public
hospitals on Schedule 2.1, Column 5, Step 5 of the Interim Hospital
Payment Rate Workbooks.
   (2) Each designated public hospital's share of 20 percent of the
amount described in subdivision (a) shall be determined by applying a
fraction, the numerator of which is the sum of the uninsured days of
inpatient hospital services reported by the designated public
hospital on Schedule 1, Column 5a, lines 25 through 33 of the Interim
Hospital Payment Rate Workbook, and the denominator of which is the
total uninsured days of inpatient hospital services reported by all
designated public hospitals on Schedule 1, Column 5a, lines 25
through 33 of the Interim Hospital Payment Rate Workbooks.
   (c) In the event federal financial participation for a subject
fiscal quarter is not available for all of the supplemental amounts
payable to private hospitals under Section 14167.3, due to the
limitations on supplemental payments based on a partial-year federal
upper payment limit, the amount payable to each designated public
hospital under subdivision (b) shall equal the designated public
hospital's allocated grant amount under subdivision (b) multiplied by
a fraction, the numerator of which is the total number of months in
the subject fiscal quarter for which federal financial participation
is available for supplemental payment amounts to private hospitals up
to the federal upper payment limit, and the denominator of which is
three.
   (d) Designated public hospitals shall be paid supplemental
Medi-Cal amounts for acute inpatient psychiatric services that are
paid directly by the department and are not the financial
responsibility of a mental health plan, as set forth in this
subdivision. The supplemental amounts shall be in addition to any
other amounts payable to designated public hospitals, or a
governmental entity with which the hospital is affiliated, with
respect to those services and shall not affect any other payments to
hospitals or to any governmental entity with which the hospital is
affiliated.
   (1) Each designated public hospital shall be paid an amount for
each subject fiscal year equal to four hundred eighty-five dollars
($485) multiplied by the hospital's acute psychiatric days that were
paid directly by the department and were not the financial
responsibility of a mental health plan, inclusive of federal
financial participation.
   (2) In the event federal financial participation for a subject
fiscal year is not available for all of the supplemental amounts
payable to designated public hospitals under paragraph (1) due to the
application of a federal upper payment limit or for any other
reason, both of the following shall apply:
   (A) The total amount payable to designated public hospitals under
paragraph (1) for the subject fiscal year shall be reduced to the
amount for which federal financial participation is available.
   (B) The amount payable under paragraph (1) to each designated
public hospital for the subject fiscal year shall be equal to the
amount computed under paragraph (1) multiplied by the ratio of the
total amount for which federal financial participation is available
to the total amount computed under paragraph (1).
   (3) In the event the amount otherwise payable to a designated
public hospital under this subdivision for a subject fiscal year
exceeds the amount for which federal financial participation is
available for that hospital, the amount due to the hospital for that
subject fiscal year shall be reduced to the amount for which federal
financial participation is available.
   (e) Notwithstanding subdivision (a) and subject to subdivisions
(g) and (h) of Section 14166.221, the state may retain for the state'
s use the funds described in subdivision (a) that would otherwise be
payable pursuant to subdivision (c) of Section 14167.9 in an
aggregate amount not to exceed four hundred twenty million dollars
($420,000,000) for the period in which this article and Article 5.22
(commencing with Section 14167.31) are in effect, provided that the
state allocates to the designated public hospitals an equal amount of
federal funds available under the Medi-Cal Hospital/Uninsured Care
Demonstration Project pursuant to subdivision (c) of Section
14166.221, and the state has determined, after consultation with the
designated public hospitals, that the designated public hospitals, or
the governmental entities with which they are affiliated, have
incurred sufficient expenditures so that the full amount allocated
can be received as federal matching funds. Federal funds allocated to
the designated public hospitals under this subdivision and claimed
under subdivision (g) of Section 14166.221 shall be distributed among
the designated public hospitals in accordance with subdivision (b).
   (f) In the event that the amounts payable as calculated under
paragraph (1) of subdivision (d) for the 2008-09 subject fiscal year
are reduced by the operation of paragraph (2) of subdivision (d) and
the ratio for the 2008-09 subject fiscal year described in
subparagraph (B) of paragraph (2) of subdivision (d) is less than
0.25, the difference between 25 percent of the amounts payable as
calculated under paragraph (1) of subdivision (d) and the amounts
payable after the application of paragraph (2) of subdivision (d)
shall be added to the supplemental payments for each private hospital
calculated under paragraph (1) of subdivision (d) for the 2009-10
subject fiscal year.
   (g) In the event that the amounts payable as calculated under
paragraph (1) of subdivision (d) for the 2009-10 subject fiscal year,
including any carryover amounts determined under subdivision (f),
are reduced by the operation of paragraph (2) of subdivision (d), the
difference between the amounts payable as calculated under paragraph
(1) of subdivision (d), including any carryover amounts, and the
amounts payable after the application of paragraph (2) of subdivision
(d) shall be added to the supplemental payments for each private
hospital calculated under paragraph (1) of subdivision (d) for the
2010-11 subject fiscal year.
  SEC. 10.  Section 14167.6 of the Welfare and Institutions Code is
amended to read:
   14167.6.  (a) The department shall increase capitation payments to
Medi-Cal managed health care plans for the subject fiscal years as
set forth in this section.
   (b) The increased capitation payments shall be made as part of the
monthly capitated payments made by the department to managed health
care plans.
   (c) The aggregate amount of increased capitation payments to all
Medi-Cal managed health care plans for all subject fiscal years shall
be one billion two hundred seventy-seven million two hundred one
thousand two hundred nine dollars ($1,277,201,209), or the maximum
amount for which federal financial participation is available,
whichever is lower.
   (d) The department shall determine the amount of the increased
capitation payments for each managed health care plan. The department
shall consider the composition of Medi-Cal enrollees in the plan,
the anticipated utilization of hospital services by the plan's
Medi-Cal enrollees, and other factors that the department determines
are reasonable and appropriate to ensuring access to high-quality
hospital services by the plan's enrollees.
   (e) The amount of increased capitation payments to each Medi-Cal
managed care health plan shall not exceed an amount that results in
capitation payments that are certified by the state's actuary as
meeting federal requirements, taking into account the requirement
that all of the increased capitation payments under this section
shall be paid by the Medi-Cal managed health care plans to hospitals
for hospital services to Medi-Cal enrollees of the plan.
   (f) (1) The increased capitation payments to managed health care
plans under this section shall be made to support the availability of
hospital services and ensure access to hospital services for
Medi-Cal beneficiaries. The increased capitation payments to managed
health care plans shall commence no later than December 31, 2010, and
shall include, but not be limited to, the sum of the increased
payments for all prior months for which payments are due.
   (2) To secure the necessary funding for the payment or payments
made pursuant to paragraph (1), the department may accumulate funds
in the Hospital Quality Assurance Fee Fund for the purpose of funding
managed care capitation payments under this article regardless of
the date on which capitation payments are scheduled to be paid in
order to secure the necessary total funding for managed care payments
by December 1, 2010. To the extent feasible, the funds shall be
accumulated as follows, provided that the department may adjust the
following dates and amounts as necessary to accumulate sufficient
funding by December 1, 2010:
   (A) Thirty percent of total necessary funding shall be accumulated
from each of the first three installments of quality assurance fees
received from the hospitals.
   (B) Ten percent of total funding necessary shall be retained from
the fourth installment of quality assurance fees received from the
hospitals.
   (g) Payments to managed health care plans that would be paid
consistent with actuarial certification and enrollment in the absence
of the payments made pursuant to this section shall not be reduced
as a consequence of payment under this section.
   (h) (1) Each managed health care plan shall expend 100 percent of
any increased capitation payments it receives under this section, on
hospital services.
   (2) The department may issue change orders to amend contracts with
managed health care plans as needed to adjust monthly capitation
payments in order to implement this section.
   (3) For entities contracting with the department pursuant to
Article 2.91 (commencing with Section 14089), any incremental
increase in capitation rates pursuant to this section shall not be
subject to negotiation and approval by the California Medical
Assistance Commission.
   (i) In the event federal financial participation is not available
for all of the increased capitation payments determined for a month
pursuant to this section for any reason, the increased capitation
payments mandated by this section for that month shall be reduced
proportionately to the amount for which federal financial
participation is available.
   (j) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall implement this section by means of policy letters or
similar instructions, without taking further regulatory action.
  SEC. 11.  Section 14167.8 of the Welfare and Institutions Code is
amended to read:
   14167.8.  The payments to a hospital under this article shall not
be made for a subject fiscal year or any portion of a subject fiscal
year during which the hospital is closed. A hospital shall be deemed
to be closed on the first day of any period during which the hospital
has no acute inpatients for at least 30 consecutive days. A hospital'
s payments under this article for a subject fiscal year during which
a hospital is closed for a portion of the subject fiscal year shall
be reduced by applying a fraction, expressed as a percentage, the
numerator of which shall be the number of days after the
implementation date during the subject fiscal year that the hospital
is closed and the denominator of which is the number of days in the
subject fiscal year after the implementation date.
  SEC. 12.  Section 14167.9 of the Welfare and Institutions Code is
amended to read:
   14167.9.  Subject to the limitations in Section 14167.14, the
following shall apply:
   (a) (1) The department shall make to hospitals the payments
described in Sections 14167.2, 14167.3, 14167.4, and subdivision (d)
of Section 14167.5 for the 2008-09, 2009-10, and 2010-11 subject
fiscal years in seven payments.
   (2) (A) The first payment shall be made on or before the later of
September 30, 2010, or the 30th day after the notice described in
Section 14167.32 is sent to each hospital.
   (B) The subsequent payments shall be made in six consecutive
semimonthly payments that shall be made on or before the later of
each of the 14th and 30th days of October, November, and December
2010, or the 30th day after the notice described in Section 14167.32
is sent to each hospital.
         (3) The amount of each payment made pursuant to this
subdivision shall be one-seventh of the amount of payments calculated
for each hospital under Sections 14167.2, 14167.3, 14167.4, and
subdivision (d) of Section 14167.5.
   (b) Notwithstanding subdivision (a), all amounts due to hospitals
under Sections 14167.2, 14167.3, 14167.4, and subdivision (d) of
Section 14167.5 that have not been paid to hospitals before December
30, 2010, pursuant to subdivision (a), shall be paid to hospitals no
later than December 30, 2010.
   (c) (1) The department shall make to hospitals the payments
described in subdivisions (a), (b), and (c) of Section 14167.5 in
seven payments.
   (2) (A) (i) The first six payments shall be made in consecutive
semimonthly payments that shall be made on or before the later of
each of the first and 15th days of October, November, and December
2010, or the 30th day after the notice described in Section 14167.32
is sent to each hospital.
   (ii) The amount of each of the first six payments shall be
one-seventh of the amount of payments calculated for each hospital
under subdivisions (a), (b), and (c) of Section 14167.5.
   (B) (i) The seventh payment shall be made on or before December
30, 2010.
   (ii) The amount of the seventh payment shall be the total amount
due to hospitals under subdivisions (a), (b), and (c) of Section
14167.5 minus the amounts previously paid to the hospitals under
subparagraph (A).
  SEC. 13.  Section 14167.10 of the Welfare and Institutions Code is
amended to read:
   14167.10.  (a) Each managed health care plan receiving increased
capitation payments under Section 14167.6 shall expend the capitation
rate increases in a manner consistent with actuarial certification,
enrollment, and utilization on hospital services. Each managed health
care plan shall expend increased capitation payments on hospital
services within 30 days of receiving the increased capitation
payments to the extent they are made for a subject month that is
prior to the date on which the payments are received by the managed
health care plan.
   (b) For each subject fiscal year, the sum of all expenditures made
by a managed health care plan for hospital services pursuant to this
section shall equal, or approximately equal, all increased
capitation payments received by the managed health care plan,
consistent with actuarial certification, enrollment, and utilization,
from the department pursuant to Section 14167.6.
   (c) Any delegation or attempted delegation by a managed health
care plan of its obligation to expend the capitation rate increases
under this section shall not relieve the plan from its obligation to
expend those capitation rate increases. Managed health care plans
shall submit the documentation the department may require to
demonstrate compliance with this subdivision. The documentation shall
demonstrate actual expenditure of the capitation rate increases for
hospital services, and not assignment to subcontractors of the
managed health care plan's obligation of the duty to expend the
capitation rate increases.
  SEC. 14.  Section 14167.11 of the Welfare and Institutions Code is
amended to read:
   14167.11.  (a) The department shall increase payments to mental
health plans for the subject fiscal years as set forth in this
section. The aggregate amount of the increased payments for a subject
fiscal quarter shall be the total of the individual hospital acute
psychiatric supplemental payment amounts for all hospitals for which
federal financial participation is available.
   (b) For each subject fiscal quarter, the state shall make
increased payments to each mental health plan. The department shall
consider the composition of Medi-Cal enrollees in the mental health
plan, the anticipated utilization of hospital services by the mental
health plan's Medi-Cal enrollees, and other factors that the
department determines are reasonable and appropriate to ensure access
to high-quality hospital services by the mental health plan's
enrollees.
   (c) The state shall make increased payments to mental health plans
exclusively for the purpose of making payments to hospitals, in
order to support the availability of hospital mental health services
and ensure access for Medi-Cal beneficiaries to hospital mental
health services. The increased payments to mental health plans shall
be made as follows:
   (1) The increased payments shall commence on or before the later
of the last day of the second month of the quarter in which federal
approval is granted or the 45th day following the day on which
federal approval is granted. Subsequent increased payments shall be
made on the last day of the second month of each quarter. The last
increased payments made pursuant to this section shall be made during
November 2010.
   (2) The increased payments made for the first quarter for which
increased payments are made under this section shall include the sum
of increased payments for all prior quarters for which payments are
due under subdivision (b).
   (3) The increased payments made during November 2010 shall include
payments computed under subdivision (b) for all quarters in the
2010-11 subject fiscal year to the extent that federal financial
participation is available for the payments.
   (4) If all necessary federal approvals are not received on or
before September 1, 2010, the department shall make semimonthly
payments starting within one month of receipt of all necessary
federal approvals until December 31, 2010.
   (d) Each mental health plan shall expend, in the form of
additional payments to hospitals, the increased payments it receives
under this section, pursuant to Section 14167.12.
   (e) In the event federal financial participation for a subject
fiscal year is not available for all of the increased acute
psychiatric payments determined for a quarter pursuant to this
section for any reason, the increased payments mandated by this
section for that quarter shall be reduced proportionately to the
amount for which federal financial participation is available.
   (f) Payments to mental health plans that would be paid in the
absence of the payments made pursuant to this section shall not be
reduced as a consequence of the payments under this section.
   (g) Notwithstanding any other provision of this article or Article
5.22 (commencing with Section 14167.31), individual hospital acute
psychiatric supplemental payments under this section and Section
14167.12 may be made directly by the department to hospitals in
accordance with Section 14167.9 when federal law does not require
that the payments be transmitted to the hospitals via mental health
plans.
   (h) The department may, as necessary, allocate money appropriated
to it from the Hospital Quality Assurance Revenue Fund to the State
Department of Mental Health for the purposes of making increased
payments to mental health plans pursuant to this article.
   (i) The amount, if any, by which the aggregate individual hospital
acute psychiatric supplemental payment amounts for a subject fiscal
quarter, including any carryover amount under this subdivision,
exceeds the amount for which federal financial participation is
available for that quarter due to the application of a federal upper
payment limit shall be added to the aggregate individual hospital
acute psychiatric supplemental payment amounts for the succeeding
subject fiscal quarter. In the event there is a carryover amount for
the subject fiscal quarter ending December 31, 2010, the amount shall
be payable under this section for the quarter ending March 31, 2011,
and, if necessary due to the application of a federal upper payment
limit, the quarter ending June 30, 2011.
  SEC. 15.  Section 14167.12 of the Welfare and Institutions Code is
amended to read:
   14167.12.  (a) At the same time that the state makes an increased
payment to a mental health plan under Section 14167.11, the state
shall notify the mental health plan that the plan shall make payments
to each subject hospital located in each county in which the mental
health plan operates as a consequence of receiving the increased
payment.
   (b) The payments made to hospitals pursuant to this section shall
be in addition to any other amounts payable to hospitals by a mental
health plan or otherwise and shall not affect any other payments to
hospitals.
   (c) For each subject fiscal year, the sum of all payments made by
a mental health plan to subject hospitals pursuant to this section
shall equal all increased payments received by the mental health plan
from the state pursuant to Section 14167.11.
   (d) Mental health plans shall not take into account payments made
pursuant to this article in negotiating the amount of payments to
hospitals that are not made pursuant to this article.
   (e) A mental health plan is obligated to make payments under this
section only to the extent of the payments it receives under Section
14167.11. A mental health plan may retain any interest it earns on
funds it receives under Section 14167.11 prior to making payments of
the funds to hospitals under this section.
   (f) No payments shall be made under this section to a new
hospital.
   (g) In the event federal financial participation for a quarter is
not available for all of the increased mental health payments made
pursuant to Section 14167.11 for any reason, the payments to
hospitals under this section shall be reduced proportionately to the
amount for which federal financial participation is available and the
department's notice under subdivision (a) shall reflect the
reduction.
  SEC. 16.  Section 14167.14 of the Welfare and Institutions Code is
amended to read:
   14167.14.  (a) The director shall do all of the following:
   (1) Submit any state plan amendment or waiver request that may be
necessary to implement this article.
   (2) Seek federal approval for the use of the entire federal upper
payment limits applicable to hospital services for payments under
this article for the 2008-09, 2009-10, and 2010-11 subject fiscal
years.
   (3) Seek federal approvals or waivers as may be necessary to
implement this article and to obtain federal financial participation
to the maximum extent possible for the payments under this article.
   (4) Amend the contracts between the managed health care plans and
the department as necessary to incorporate the provisions of Sections
14167.6 and 14167.10 and promptly seek all necessary federal
approvals of those amendments. The department shall pursue amendments
to the contracts as soon as possible after the effective date of
this article and Article 5.22 (commencing with Section 14167.31), and
shall not wait for federal approval of this article or Article 5.22
(commencing with Section 14167.31) prior to pursuing amendments to
the contracts. The amendments to the contracts shall, among other
provisions, set forth an agreement to increase payment rates to
managed health care plans under Section 14166.6 and increase payments
to hospitals under Section 14166.10 effective April 2009 or as soon
thereafter as possible, conditioned on obtaining all federal
approvals necessary for federal financial participation for the
increased capitation payments to the managed health care plans.
   (b) In implementing this article, the department may utilize the
services of the Medi-Cal fiscal intermediary through a change order
to the fiscal intermediary contract to administer this program,
consistent with the requirements of Sections 14104.6, 14104.7,
14104.8, and 14104.9. Contracts entered into for purposes of
implementing this article or Article 5.22 (commencing with Section
14167.31) shall not be subject to Part 2 (commencing with Section
10100) of Division 2 of the Public Contract Code.
   (c) This article shall become inoperative if either of the
following occurs:
   (1) In the event, and on the effective date, of a final judicial
determination made by any court of appellate jurisdiction or a final
determination by the federal Department of Health and Human Services
or the federal Centers for Medicare and Medicaid Services that any
element of this article cannot be implemented.
   (2) In the event both of the following conditions exist:
   (A) The federal Centers for Medicare and Medicaid Services denies
approval for, or does not approve before January 1, 2012, the
implementation of Article 5.22 (commencing with Section 14167.31) or
this article.
   (B) Either or both articles cannot be modified by the department
pursuant to subdivision (e) of Section 14167.35 in order to meet the
requirements of federal law or to obtain federal approval.
   (d) If this article becomes inoperative pursuant to paragraph (1)
of subdivision (c) and the determination applies to any period or
periods of time prior to the effective date of the determination, the
department shall have authority to recoup all payments made pursuant
to this article during that period or those periods of time.
   (e) In the event any hospital, or any party on behalf of a
hospital, shall initiate a case or proceeding in any state or federal
court in which the hospital seeks any relief of any sort whatsoever,
including, but not limited to, monetary relief, injunctive relief,
declaratory relief, or a writ, based in whole or in part on a
contention that any or all of this article is unlawful and may not be
lawfully implemented, both of the following shall apply:
   (1) No payments shall be made to the hospital pursuant to this
article until the case or proceeding is finally resolved, including
the final disposition of all appeals.
   (2) Any amount computed to be payable to the hospital pursuant to
this section for a project year shall be withheld by the department
and shall be paid to the hospital only after the case or proceeding
is finally resolved, including the final disposition of all appeals.
   (f) Subject to Section 14167.352, no payment shall be made under
this article until all necessary federal approvals for the payment
and for the fee provisions in Article 5.22 (commencing with Section
14167.31) have been obtained and the fee has been imposed and
collected. Notwithstanding any other provision of law, payments under
this article shall be made only to the extent that the fee
established in Article 5.22 (commencing with Section 14167.31) is
collected and available to cover the nonfederal share of the
payments.
   (g) Supplemental payments for the 2008-09 federal fiscal year
shall not reduce the maximum federal funds available annually
pursuant to the Special Terms and Conditions, as amended October 5,
2007, of the Current Section 1115 Waiver.
   (h) (1) The director shall negotiate the federal approvals
required to implement this article and Article 5.22 (commencing with
Section 14167.31) for the 2009-10 and 2010-11 federal fiscal years
concurrently with the negotiation of a federal waiver that will
replace the Current Section 1115 Waiver, with a goal of obtaining
federal approvals that do not adversely impact the federal funds that
would otherwise be available for services to Medi-Cal beneficiaries
and the uninsured. The director may initiate the concurrent
negotiations required by this subdivision by submitting a concept
paper to the federal Centers for Medicare and Medicaid Services
outlining the key elements of the replacement waiver consistent with
the goals set forth in this subdivision.
   (2) In negotiating the terms of a federal waiver that will replace
the Current 1115 Waiver, the department shall explore opportunities
for reform of the Medi-Cal program and strengthen California's health
care safety net. Subject to subsequent legislative approval, the
department shall explore program reforms, that may include, but need
not be limited to, strategies to accomplish payment system reforms
for hospital inpatient and outpatient care, including incentive based
payments, new payment methodologies such as diagnostic-related
group-based (DRG-based), or similar methodologies, patient safety
protocols, and quality measurement.
   (3) This article and Article 5.22 (commencing with Section
14167.31) shall not be implemented with respect to the 2009-10 and
2010-11 federal fiscal years until the earlier of April 30, 2010, or
the date the federal government approves a federal waiver for a
demonstration that will replace the Current Section 1115 Waiver.
   (i) A hospital's receipt of payments under this article for
services rendered prior to the effective date of this article is
conditioned on the hospital's continued participation in Medi-Cal for
at least 30 days after the effective date of this article.
   (j) All payments made by the department to hospitals, managed
health care plans, and mental health plans under this article shall
be made only from the following:
   (1) The quality assurance fee set forth in Article 5.22
(commencing with Section 14167.31) and due and payable on or before
December 31, 2010.
   (2) Federal reimbursement and any other related federal funds.
  SEC. 16.5.  Section 14167.31 of the Welfare and Institutions Code
is amended to read:
   14167.31.  For the purposes of this article, the following
definitions shall apply:
   (a) (1) "Aggregate annual quality assurance fee" means, with
respect to a hospital that is not a prepaid health plan hospital, the
sum of all of the following:
   (A) The annual fee-for-service days for an individual hospital
multiplied by the fee-for-service per diem quality assurance fee
rate.
   (B) The annual managed care days for an individual hospital
multiplied by the managed care per diem quality assurance fee rate.
   (C) The annual Medi-Cal days for an individual hospital multiplied
by the Medi-Cal per diem quality assurance fee rate.
   (2) "Aggregate annual quality assurance fee" means, with respect
to a hospital that is a prepaid health plan hospital, the sum of all
of the following:
   (A) The annual fee-for-service days for an individual hospital
multiplied by the fee-for-service per diem quality assurance fee
rate.
   (B) The annual managed care days for an individual hospital
multiplied by the prepaid health plan hospital managed care per diem
quality assurance fee rate.
   (C) The annual Medi-Cal managed care days for an individual
hospital multiplied by the prepaid health plan hospital Medi-Cal
managed care per diem quality assurance fee rate.
   (D) The annual Medi-Cal fee-for-service days for an individual
hospital multiplied by the Medi-Cal per diem quality assurance fee
rate.
   (3) "Aggregate quality assurance fee after the application of the
fee percentage" shall be determined separately for each subject
federal fiscal year and means the aggregate annual quality assurance
fee multiplied by the fee percentage for the subject federal fiscal
year.
   (4) "Aggregate quality assurance fee" means the sum of the
aggregate quality assurance fee after the application of the fee
percentage for a hospital for each subject federal fiscal year.
   (b) "Annual fee-for-service days" means the number of
fee-for-service days of each hospital subject to the quality
assurance fee in the 2007 calendar year, as reported on the days data
source.
   (c) "Annual managed care days" means the number of managed care
days of each hospital subject to the quality assurance fee in the
2007 calendar year, as reported on the days data source.
   (d) "Annual Medi-Cal days" means the number of Medi-Cal days of
each hospital subject to the quality assurance fee in the 2007
calendar year, as reported on the days data source.
   (e) "Converted hospital" shall mean a hospital described in
subdivision (b) of Section 14167.1.
   (f) "Days data source" means the following:
   (1) For a hospital that did not submit an Annual Financial
Disclosure Report to the Office of Statewide Health Planning and
Development for a fiscal year ending during 2007, but submitted that
report for a fiscal period ending in 2008 that includes at least 10
months of 2007, the Annual Financial Disclosure Report submitted by
the hospital to the Office of Statewide Health Planning and
Development for the fiscal period in 2008 that includes at least 10
months of 2007.
   (2) For a hospital owned by Kaiser Foundation Hospitals that
submitted corrections to reported patient days to the Office of
Statewide Health Planning and Development for its fiscal year ending
in 2007 before July 31, 2009, the corrected data.
   (3) For all other hospitals, the hospital's Annual Financial
Disclosure Report in the Office of Statewide Health Planning and
Development files as of October 31, 2008, for its fiscal year ending
during 2007.
   (g) "Designated public hospital" shall have the meaning given in
subdivision (d) of Section 14166.1 as that section may be amended
from time to time.
   (h) "Exempt facility" means any of the following:
   (1) A public hospital, which shall include either of the
following:
   (A) A hospital, as defined in paragraph (25) of subdivision (a) of
Section 14105.98.
   (B) A tax-exempt nonprofit hospital that is licensed under
subdivision (a) of Section 1250 of the Health and Safety Code and
operating a hospital owned by a local health care district, and is
affiliated with the health care district hospital owner by means of
the district's status as the nonprofit corporation's sole corporate
member.
   (2) With the exception of a hospital that is in the Charitable
Research Hospital peer group, as set forth in the 1991 Hospital Peer
Grouping Report published by the department, a hospital that is a
hospital designated as a specialty hospital in the hospital's Office
of Statewide Health Planning and Development Hospital Annual
Disclosure Report for the hospital's fiscal year ending in the 2007
calendar year.
   (3) A hospital that satisfies the Medicare criteria to be a
long-term care hospital.
   (4) A small and rural hospital as specified in Section 124840 of
the Health and Safety Code designated as that in the hospital's
Office of Statewide Health Planning and Development Hospital Annual
Disclosure Report for the hospital's fiscal year ending in the 2007
calendar year.
   (i) (1) "Federal approval" means the last approval by the federal
government required for the implementation of this article and
Article 5.21 (commencing with Section 14167.1).
   (2) If federal approval is sought initially for only the 2008-09
federal fiscal year and separately secured for subsequent federal
fiscal years, the implementation date, as defined in subdivision (i)
of Section 14167.1, for the 2008-09 federal fiscal year shall occur
when all necessary federal approvals have been secured for that
federal fiscal year.
   (j) "Fee-for-service per diem quality assurance fee rate" means a
fixed fee on fee-for-service days of two hundred fifteen dollars and
thirty cents ($215.30) per day.
   (k) "Fee-for-service days" means inpatient hospital days where the
service type is reported as "acute care," "psychiatric care," and
"chemical dependency care and rehabilitation care," and the payer
category is reported as "Medicare traditional," "county indigent
programs-traditional," "other third parties-traditional," "other
indigent," and "other payers," for purposes of the Annual Financial
Disclosure Report submitted by hospitals to the Office of Statewide
Health Planning and Development.
   (l) "Fee percentage" means, for each subject federal fiscal year,
a fraction, expressed as a percentage, the numerator of which is the
amount of payments for the subject federal fiscal year under Sections
14167.2, 14167.3, and 14167.4, subdivision (d) of Section 14167.5,
and Sections 14167.6 and 14167.11, including payments made directly
to hospitals pursuant to subdivision (g) of Section 14167.11, for
which federal financial participation is available and the
denominator of which is two billion nine hundred eighty-two million
one hundred twenty thousand five hundred sixty dollars
($2,982,120,560).
   (m) "General acute care hospital" means any hospital licensed
pursuant to subdivision (a) of Section 1250 of the Health and Safety
Code.
   (n) "Hospital community" means any hospital industry organization
or system that represents children's hospitals, nondesignated public
hospitals, designated public hospitals, private safety-net hospitals,
and other public or private hospitals.
   (o) "Managed care days" means inpatient hospital days as reported
on the days data source where the service type is reported as "acute
care," "psychiatric care," and "chemical dependency care and
rehabilitation care," and the payer category is reported as "Medicare
managed care," "county indigent programs-managed care," and "other
third parties-managed care," for purposes of the Annual Financial
Disclosure Report submitted by hospitals to the Office of Statewide
Health Planning and Development.
   (p) "Managed care per diem quality assurance fee rate" means a
fixed fee on managed care days of twenty-two dollars and fifty cents
($22.50) per day.
   (q) "Medi-Cal days" means inpatient hospital days as reported on
the days data source where the service type is reported as "acute
care," "psychiatric care," and "chemical dependency care and
rehabilitation care," and the payer category is reported as
"Medi-Cal-traditional" and "Medi-Cal-managed care," for purposes of
the Annual Financial Disclosure Report submitted by hospitals to the
Office of Statewide Health Planning and Development.
   (r) "Medi-Cal fee-for-service days" means inpatient hospital days
as reported on the days data source where the service type is
reported as "acute care," "psychiatric care," and "chemical
dependency care and rehabilitation care," and the payer category is
reported as "Medi-Cal traditional" for purposes of the Annual
Financial Disclosure Report submitted by hospitals to the Office of
Statewide Health Planning and Development.
   (s) "Medi-Cal managed care days" means inpatient hospital days as
reported on the days data source where the service type is reported
as "acute care," "psychiatric care," and "chemical dependency care
and rehabilitation care," and the payer category is reported as
"Medi-Cal managed care" for purposes of the Annual Financial
Disclosure Report submitted by hospitals to the Office of Statewide
Health Planning and Development.
   (t) "Medi-Cal per diem quality assurance fee rate" means a fixed
fee on Medi-Cal days of two hundred thirty-two dollars ($232) per
day.
   (u) "Nondesignated public hospital" means either of the following:

   (1) A public hospital that is licensed under subdivision (a) of
Section 1250 of the Health and Safety Code, is not designated as a
specialty hospital in the hospital's annual financial disclosure
report for the hospital's latest fiscal year ending in 2007, and
satisfies the definition in paragraph (25) of subdivision (a) of
Section 14105.98, excluding designated public hospitals.
                                                          (2) A
tax-exempt nonprofit hospital that is licensed under subdivision (a)
of Section 1250 of the Health and Safety Code, is not designated as a
specialty hospital in the hospital's annual financial disclosure
report for the hospital's latest fiscal year ending in 2007, is
operating a hospital owned by a local health care district, and is
affiliated with the health care district hospital owner by means of
the district's status as the nonprofit corporation's sole corporate
member.
   (v) "Prepaid health plan hospital" means a hospital owned by a
nonprofit public benefit corporation that shares a common board of
directors with a nonprofit health care service plan.
   (w) "Prepaid health plan hospital managed care per diem quality
assurance fee rate" means a fixed fee on non-Medi-Cal managed care
days for prepaid health plan hospitals of twelve dollars and sixty
cents ($12.60) per day.
   (x) "Prepaid health plan hospital Medi-Cal managed care per diem
quality assurance fee rate" means a fixed fee on Medi-Cal managed
care days for prepaid health plan hospitals of one hundred
twenty-nine dollars and ninety-two cents ($129.92) per day.
   (y) "Prior fiscal year data" means any data taken from sources
that the department determines are the most accurate and reliable at
the time the determination is made, or may be calculated from the
most recent audited data using appropriate update factors. The data
may be from prior fiscal years, current fiscal years, or projections
of future fiscal years.
   (z) "Private hospital" means a hospital that meets all of the
following conditions:
   (1) Is licensed pursuant to subdivision (a) of Section 1250 of the
Health and Safety Code.
   (2) Is in the Charitable Research Hospital peer group, as set
forth in the 1991 Hospital Peer Grouping Report published by the
department, or is not designated as a specialty hospital in the
hospital's Office of Statewide Health Planning and Development Annual
Financial Disclosure Report for the hospital's latest fiscal year
ending in 2007.
   (3) Does not satisfy the Medicare criteria to be classified as a
long-term care hospital.
   (4) Is a nonpublic hospital, nonpublic converted hospital, or
converted hospital as those terms are defined in paragraphs (26) to
(28), inclusive, respectively, of subdivision (a) of Section
14105.98.
   (aa) "Subject federal fiscal year" means a federal fiscal year
ending after the implementation date, as defined in Section 14167.1,
and beginning before December 31, 2010.
   (ab) "Subject fiscal quarter" means a state fiscal quarter ending
after the implementation date, as defined in Section 14167.1, and
beginning before January 1, 2011.
   (ac) "Subject fiscal year" means a state fiscal year ending after
the implementation date, as defined in Section 14167.1, and beginning
before December 31, 2010.
   (ad) "Upper payment limit" means a federal upper payment limit on
the amount of the Medicaid payment for which federal financial
participation is available for a class of service and a class of
health care providers, as specified in Part 447 of Title 42 of the
Code of Federal Regulations.
  SEC. 17.  Section 14167.32 of the Welfare and Institutions Code is
amended to read:
   14167.32.  (a) There shall be imposed on each general acute care
hospital that is not an exempt facility a quality assurance fee,
provided that a quality assurance fee under this article shall not be
imposed on a converted hospital for a subject federal fiscal year in
which the hospital becomes a converted hospital or for subsequent
federal fiscal years.
   (b) The quality assurance fee shall be computed starting on the
implementation date, as defined in Section 14167.1, and continue
through and including December 31, 2010.
   (c) Subject to Section 14167.352, upon receipt of federal
approval, the following shall become operative:
   (1) Within 30 days following receipt of the notice of federal
approval from the federal government, the department shall send
notice to each hospital subject to the quality assurance fee, and
publish on its Internet Web site, the following information:
   (A) The date that the state received notice of federal approval.
   (B) The fee percentage or percentages for each subject federal
fiscal year.
   (2) The notice to each hospital subject to the quality assurance
fee shall also state the following:
   (A) The aggregate quality assurance fee after the application of
the fee percentage for each subject federal fiscal year.
   (B) The aggregate quality assurance fee.
   (C) The amount of each installment payment due from the hospital
with respect to the aggregate quality assurance fee.
   (D) The date on which each installment payment is due.
   (3) (A) The hospitals shall pay the aggregate quality assurance
fee in seven equal installments.
   (B) (i) The first installment payment shall be made on or before
the later of September 14, 2010, or the 14th day after the notice
described in this section is sent to each hospital.
   (ii) The additional installment payments shall be made in six
consecutive semimonthly payments that shall be due and payable on or
before the later of each of the first and 15th days of October,
November, and December 2010, or the 14th day after the notice
described in this section is sent to each hospital.
   (4) Notwithstanding paragraph (3), the amount of each hospital's
aggregate quality assurance fee that has not been paid by the
hospital before December 15, 2010, pursuant to paragraph (3), shall
be paid by the hospital no later than December 15, 2010.
   (d) The quality assurance fee, as paid pursuant to this
subdivision, shall be paid by each hospital subject to the fee to the
department for deposit in the Hospital Quality Assurance Revenue
Fund. Deposits may be accepted at any time and will be credited
toward the fiscal year for which they were assessed.
   (e) This section shall become inoperative if the federal Centers
for Medicare and Medicaid Services denies approval for, or does not
approve before January 1, 2012, the implementation of this article or
Article 5.21 (commencing with Section 14167.1), and either or both
articles cannot be modified by the department pursuant to subdivision
(e) of Section 14167.35 in order to meet the requirements of federal
law or to obtain federal approval.
   (f) In no case shall the aggregate fees collected in a subject
federal fiscal year pursuant to this section exceed the maximum
percentage of the annual aggregate net patient revenue for hospitals
subject to the fee that is prescribed pursuant to federal law and
regulations as necessary to preclude a finding that an indirect
guarantee has been created.
   (g) (1) Interest shall be assessed on quality assurance fees not
paid on the date due at the greater of 10 percent per annum or the
rate at which the department assesses interest on Medi-Cal program
overpayments to hospitals that are not repaid when due. Interest
shall begin to accrue the day after the date the payment was due and
shall be deposited in the Hospital Quality Assurance Revenue Fund.
   (2) In the event that any fee payment is more than 60 days
overdue, a penalty equal to the interest charge described in
paragraph (1) shall be assessed and due for each month for which the
payment is not received after 60 days.
   (h) When a hospital fails to pay all or part of the quality
assurance fee on or before the date that payment is due, the
department may the following day immediately begin to deduct the
unpaid assessment and interest owed from any Medi-Cal payments or
other state payments to the hospital in accordance with Section
12419.5 of the Government Code until the full amount is recovered.
All amounts, except penalties, deducted by the department under this
subdivision shall be deposited in the Hospital Quality Assurance
Revenue Fund. The remedy provided to the department by this section
is in addition to other remedies available under law.
   (i) The payment of the quality assurance fee shall not be
considered as an allowable cost for Medi-Cal cost reporting and
reimbursement purposes.
   (j) The department shall work in consultation with the hospital
community to implement the quality assurance fee.
   (k) This subdivision creates a contractually enforceable promise
on behalf of the state to use the proceeds of the quality assurance
fee, including any federal matching funds, solely and exclusively for
the purposes set forth in this article as they existed on the
effective date of this article, to limit the amount of the proceeds
of the quality assurance fee to be used to pay for the health care
coverage of children to the amounts specified in this article and to
make any payments for the department's costs of administration to the
amounts set forth in this article on the effective date of this
article to maintain and continue prior reimbursement levels as set
forth in Article 5.21 (commencing with Section 14167.1) on the
effective date of that article, and to otherwise comply with all its
obligations set forth in Article 5.21 (commencing with Section
14167.1) and this article provided that the following amendments to
this article or Article 5.21 (commencing with Section 14167.1) made
during the 2010 portion of the 2009-10 Regular Session, or included
in Senate Bill 208 of the 2009-10 Regular Session, shall control for
purposes of this section:
   (1) Amendments affecting the timing of the fee to be imposed or
the payments to be made to a hospital or hospital group.
   (2) Amendments affecting the amount of fee to be imposed on a
hospital or hospital group, or the amount or method of payments to be
made to any hospital or hospital group that are contained in
Assembly Bill 1653, if enacted in the 2009-10 Regular Session, or
arise from, or have as a basis, a decision, advice, or determination
by the federal Centers for Medicare and Medicaid Services relating to
federal approval of the quality assurance fee or the payments set
forth in this article or Article 5.21 (commencing with Section
14167.1).
   (3) Amendments modifying the priority given to Medi-Cal managed
care payments.
   (4) Amendments modifying the responsibility of nonexempt hospitals
to make fee payments.
   (l) For the purpose of this article, references to the receipt of
notice by the state of federal approval of the implementation of this
article shall refer to the last date that the state receives notice
of all federal approval or waivers required for implementation of
this article and Article 5.21 (commencing with Section 14167.1),
subject to Section 14167.14.
   (m) (1) Effective January 1, 2011, the rates payable to hospitals
and managed health care plans under Medi-Cal shall be the rates then
payable without the supplemental and increased capitation payments
set forth in Article 5.21 (commencing with Section 14167.1).
   (2) The supplemental payments and other payments under Article
5.21 (commencing with Section 14167.1) shall be regarded as quality
assurance payments, the implementation or suspension of which does
not affect a determination of the adequacy of any rates under federal
law.
   (n) (1) Subject to paragraph (2), the director may waive any or
all interest and penalties assessed under this article in the event
that the director determines, in his or her sole discretion, that the
hospital has demonstrated that imposition of the full quality
assurance fee on the timelines applicable under this article has a
high likelihood of creating a financial hardship for the hospital or
a significant danger of reducing the provision of needed healthcare
services.
   (2) Waiver of some or all of the interest or penalties under this
subdivision shall be conditioned on the hospital's agreement to make
fee payments, or to have the payments withheld from payments
otherwise due from the Medi-Cal program to the hospital, on a
schedule developed by the department that takes into account the
financial situation of the hospital and the potential impact on
services.
   (3) A decision by the director under this subdivision shall not be
subject to judicial review.
  SEC. 18.  Section 14167.35 of the Welfare and Institutions Code is
amended to read:
   14167.35.  (a) The Hospital Quality Assurance Revenue Fund is
hereby created in the State Treasury.
   (b) (1) All fees required to be paid to the state pursuant to this
article shall be paid in the form of remittances payable to the
department.
   (2) The department shall directly transmit the fee payments to the
Treasurer to be deposited in the Hospital Quality Assurance Revenue
Fund. Notwithstanding Section 16305.7 of the Government Code, any
interest and dividends earned on deposits in the fund shall be
retained in the fund for purposes specified in subdivision (c).
   (c) All funds in the Hospital Quality Assurance Revenue Fund,
together with any interest and dividends earned on money in the fund,
shall, upon appropriation by the Legislature, be used exclusively to
enhance federal financial participation for hospital services under
the Medi-Cal program, to provide additional reimbursement to, and to
support quality improvement efforts of, hospitals, and to minimize
uncompensated care provided by hospitals to uninsured patients, in
the following order of priority:
   (1) To pay for the department's staffing and administrative costs
directly attributable to implementing Article 5.21 (commencing with
Section 14167.1) and this article, including any administrative fees
that the director determines shall be paid to mental health plans
pursuant to subdivision (d) of Section 14167.11 and repayment of the
loan made to the department from the Private Hospital Supplemental
Fund pursuant to the act that added this section.
   (2) To pay for the health care coverage for children in the amount
of eighty million dollars ($80,000,000) for each subject fiscal
quarter for which payments are made under Article 5.21 (commencing
with Section 14167.1).
   (3) To make increased capitation payments to managed health care
plans pursuant to Article 5.21 (commencing with Section 14167.1).
   (4) To pay funds from the Hospital Quality Assurance Revenue Fund
pursuant to Section 14167.5 that would have been used for grant
payments and that are retained by the state, and to make increased
payments to hospitals, including grants, pursuant to Article 5.21
(commencing with Section 14167.1), both of which shall be of equal
priority.
   (5) To make increased payments to mental health plans pursuant to
Article 5.21 (commencing with Section 14167.1).
   (d) Any amounts of the quality assurance fee collected in excess
of the funds required to implement subdivision (c), including any
funds recovered under subdivision (d) of Section 14167.14 or
subdivision (e) of Section 14167.36, shall be refunded to general
acute care hospitals, pro rata with the amount of quality assurance
fee paid by the hospital, subject to the limitations of federal law.
If federal rules prohibit the refund described in this subdivision,
the excess funds shall be deposited in the Distressed Hospital Fund
to be used for the purposes described in Section 14166.23, and shall
be supplemental to and not supplant existing funds.
   (e) Any methodology or other provision specified in Article 5.21
(commencing with Section 14167.1) and this article may be modified by
the department, in consultation with the hospital community, to the
extent necessary to meet the requirements of federal law or
regulations to obtain federal approval or to enhance the probability
that federal approval can be obtained, provided the modifications do
not violate the spirit and intent of Article 5.21 (commencing with
Section 14167.1) or this article and are not inconsistent with the
conditions of implementation set forth in Section 14167.36.
   (f) The department, in consultation with the hospital community,
shall make adjustments, as necessary, to the amounts calculated
pursuant to Section 14167.32 in order to ensure compliance with the
federal requirements set forth in Section 433.68 of Title 42 of the
Code of Federal Regulations or elsewhere in federal law.
   (g) The department shall request approval from the federal Centers
for Medicare and Medicaid Services for the implementation of this
article. In making this request, the department shall seek specific
approval from the federal Centers for Medicare and Medicaid Services
to exempt providers identified in this article as exempt from the
fees specified, including the submission, as may be necessary, of a
request for waiver of the broad based requirement, waiver of the
uniform fee requirement, or both, pursuant to paragraphs (1) and (2)
of subdivision (e) of Section 433.68 of Title 42 of the Code of
Federal Regulations.
   (h) (1) For purposes of this section, a modification pursuant to
this section shall be implemented only if the modification, change,
or adjustment does not do either of the following:
   (A) Reduces or increases the supplemental payments or grants made
under Article 5.21 (commencing with Section 14167.1) in the aggregate
for the 2008-09, 2009-10, and 2010-11 federal fiscal years to a
hospital by more than 2 percent of the amount that would be
determined under this article without any change or adjustment.
   (B) Reduces or increases the amount of the fee payable by a
hospital in total under this article for the 2008-09, 2009-10, and
2010-11 federal fiscal years by more than 2 percent of the amount
that would be determined under this article without any change or
adjustment.
   (2) The department shall provide the Joint Legislative Budget
Committee and the fiscal and appropriate policy committees of the
Legislature a status update of the implementation of Article 5.21
(commencing with Section 14167.1) and this article on January 1,
2010, and quarterly thereafter. Information on any adjustments or
modifications to the provisions of this article or Article 5.21
(commencing with Section 14167.1) that may be required for federal
approval shall be provided coincident with the consultation required
under subdivisions (f) and (g).
   (i) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement this article or Article 5.21 (commencing
with Section 14167.1) by means of provider bulletins, all plan
letters, or other similar instruction, without taking regulatory
action. The department shall also provide notification to the Joint
Legislative Budget Committee and to the appropriate policy and fiscal
committees of the Legislature within five working days when the
above-described action is taken in order to inform the Legislature
that the action is being implemented.
  SEC. 18.5.  Section 14167.354 of the Welfare and Institutions Code
is amended to read:
   14167.354.  (a) (1)  Upon receipt of a letter that indicates
likely federal approval that the director determines is sufficient
for implementation under Section 14167.352, or upon the receipt of
all final federal approvals necessary for the implementation of this
article and Article 5.21 (commencing with Section 14167.1), the
following shall occur:
   (A) To the maximum extent possible, and consistent with the
availability of funds in the Hospital Quality Assurance Revenue Fund,
the department shall make all of the payments under Sections
14167.2, 14167.3, 14167.4, 14167.6, and 14167.11, and subdivision (d)
of Section 14167.5, including, but not limited to, supplemental
payments and increased capitation payments, prior to January 1, 2011.

   (B) The department shall make supplemental payments to hospitals
under Article 5.21 (commencing with Section 14167.1) consistent with
the timeframe described in Section 14167.9 or a modified timeline
developed pursuant to Section 14167.353.
   (2) (A) In determining the amount available for the nonfederal
share of payments in a particular payment cycle, the department shall
deduct no more than the following amounts to account for the
priority payments to the state under paragraph (2) of subdivision (c)
of Section 14167.35:
   (i) Eighty million dollars ($80,000,000) for children's health
coverage for each subject fiscal quarter for which some or all
supplemental payments to hospitals have already been made.
   (ii) Eighty million dollars ($80,000,000) for children's health
coverage for each subject fiscal quarter for which supplemental
payments are being calculated to be paid to hospitals, subject to the
availability of funding, in the current payment cycle.
   (B) Notwithstanding any other provision of law, in determining the
amount available for the nonfederal share of payments in a payment
cycle described in subparagraph (A), the department shall not
consider any payments for children's health care coverage previously
made under paragraph (2) of subdivision (c) of Section 14167.35.
   (3) (A) In determining the amount available in a particular
payment cycle, the department shall deduct no more than the following
amounts whether made directly to the designated public hospitals or
retained by the state:
   (i) Seventy-three million seven hundred fifty thousand dollars
($73,750,000) for each subject fiscal quarter for which some or all
supplemental payments to hospitals have already been made.
   (ii) Seventy-three million seven hundred fifty thousand dollars
($73,750,000) for each subject fiscal quarter for which supplemental
payments are being calculated to be paid to hospitals, subject to the
availability of funding, in the current payment cycle.
   (B) Notwithstanding any other provision of law, in determining the
amount available for a payment cycle described in subparagraph (A),
the department shall not consider any payments of direct grants
previously made to the designated public hospitals or transferred to
the state from the Quality Assurance Revenue Fund under Section
14167.5 to account for the direct grants described in Section
14167.5.
   (b) Notwithstanding any other provision of this article or Article
5.21 (commencing with Section 14167.1), if the director determines,
on or after December 15, 2010, that there are insufficient funds
available in the Hospital Quality Assurance Revenue Fund to make all
scheduled payments under Article 5.21 (commencing with Section
14167.1) by the end of the 2010 calendar year, he or she shall
consult with representatives of the hospital community to develop an
acceptable plan for making additional payments to providers in the
first two quarters of 2011 to maximize the use of delinquent fee
payments or other deposits or interest projected to become available
in the fund after December 15, 2010, but before June 30, 2011.
   (c) Nothing in this section shall require the department to
continue to make payments under Article 5.21 (commencing with Section
14167.1) if, after the consultation required under subdivision (b),
the director determines in the exercise of his or her sole discretion
that a workable plan for the continued payments cannot be developed.

   (d) Subdivisions (b) and (c) shall be implemented only if and to
the extent federal financial participation is available for continued
supplemental payments to providers.
   (e) If any payment or payments made pursuant to this section are
found to be inconsistent with federal law, the department shall
recoup the payments by means of withholding or any other available
remedy.
   (f) Nothing in this section shall be read as affecting the
department's ongoing authority to continue, after December 31, 2010,
to collect quality assurance fees imposed on or before December 31,
2010.
  SEC. 19.  Section 14182 of the Welfare and Institutions Code is
amended and renumbered to read:
   14182.9.  Notwithstanding the Administrative Procedure Act,
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code, the department may implement the
provisions of this article through all-county welfare director
letters or similar instruction, without taking regulatory action.
Prior to issuing any letter or similar instrument authorized pursuant
to this section, the department shall notify and consult with
stakeholders, including advocates, providers, and beneficiaries, in
implementing, interpreting, or making specific this article. The
department shall notify the appropriate policy and fiscal committees
of the Legislature of its intent to issue instructions under this
section at least five days in advance of the issuance.
  SEC. 20.  Section 14182 is added to the Welfare and Institutions
Code, to read:
   14182.  (a) (1) In furtherance of the waiver or demonstration
project developed pursuant to Section 14180, the department may
require seniors and persons with disabilities who do not have other
health coverage to be assigned as mandatory enrollees into new or
existing managed care health plans. To the extent that enrollment is
required by the department, an enrollee's access to fee-for-service
Medi-Cal shall not be terminated until the enrollee has been assigned
to a managed care health plan.
   (2) For purposes of this section:
   (A) "Other health coverage" means health coverage providing the
same full or partial benefits as the Medi-Cal program, health
coverage under another state or federal medical care program, or
health coverage under contractual or legal entitlement, including,
but not limited to, a private group or indemnification insurance
program.
   (B) "Managed care health plan" means an individual, organization,
or entity that enters into a contract with the department pursuant to
Article 2.7 (commencing with Section 14087.3), Article 2.81
(commencing with Section 14087.96), Article 2.91 (commencing with
Section 14089), or Chapter 8 (commencing with Section 14200).
   (b) In exercising its authority pursuant to subdivision (a), the
department shall do all of the following:
   (1) Assess and ensure the readiness of the managed care health
plans to address the unique needs of seniors or persons with
disabilities pursuant to the applicable readiness evaluation criteria
and requirements set forth in paragraphs (1) to (8), inclusive, of
subdivision (b) of Section 14087.48.
   (2) Ensure the managed care health plans provide access to
providers that comply with applicable state and federal laws,
including, but not limited to, physical accessibility and the
provision of health plan information in alternative formats.
   (3) Develop and implement an outreach and education program for
seniors and persons with disabilities, not currently enrolled in
Medi-Cal managed care, to inform them of their enrollment options and
rights under the demonstration project. Contingent upon available
private or public dollars other than moneys from the General Fund,
the department or its designated agent for enrollment and outreach
may partner or contract
with community-based, nonprofit consumer or health insurance
assistance organizations with expertise and experience in assisting
seniors and persons with disabilities in understanding their health
care coverage options. Contracts entered into or amended pursuant to
this paragraph shall be exempt from Chapter 2 (commencing with
Section 10290) of Part 2 of Division 2 of the Public Contract Code
and any implementing regulations or policy directives.
   (4) At least three months prior to enrollment, inform
beneficiaries who are seniors or persons with disabilities, through a
notice written at no more than a sixth grade reading level, about
the forthcoming changes to their delivery of care, including, at a
minimum, how their system of care will change, when the changes will
occur, and who they can contact for assistance with choosing a
delivery system or with problems they encounter. In developing this
notice, the department shall consult with consumer representatives
and other stakeholders.
   (5) Implement an appropriate cultural awareness and sensitivity
training program regarding serving seniors and persons with
disabilities for managed care health plans and plan providers and
staff in the Medi-Cal Managed Care Division of the department.
   (6) Establish a process for assigning enrollees into an organized
delivery system for beneficiaries who do not make an affirmative
selection of a managed care health plan. The department shall develop
this process in consultation with stakeholders and in a manner
consistent with the waiver or demonstration project developed
pursuant to Section 14180. The department shall base plan assignment
on an enrollee's existing or recent utilization of providers, to the
extent possible. If the department is unable to make an assignment
based on the enrollee's affirmative selection or utilization history,
the department shall base plan assignment on factors, including, but
not limited to, plan quality and the inclusion of local health care
safety net system providers in the plan's provider network.
   (7) Review and approve the mechanism or algorithm that has been
developed by the managed care health plan, in consultation with their
stakeholders and consumers, to identify, within the earliest
possible timeframe, persons with higher risk and more complex health
care needs pursuant to paragraph (11) of subdivision (c).
   (8) Provide managed care health plans with historical utilization
data for beneficiaries upon enrollment in a managed care health plan
so that the plans participating in the demonstration project are
better able to assist beneficiaries and prioritize assessment and
care planning.
   (9) Develop and provide managed care health plans participating in
the demonstration project with a facility site review tool for use
in assessing the physical accessibility of providers, including
specialists and ancillary service providers that provide care to a
high volume of seniors and persons with disabilities, at a clinic or
provider site, to ensure that there are sufficient physically
accessible providers. Every managed care health plan participating in
the demonstration project shall make the results of the facility
site review tool publicly available on their Internet Web site and
shall regularly update the results to the department's satisfaction.
   (10) Develop a process to enforce legal sanctions, including, but
not limited to, financial penalties, withholding of Medi-Cal
payments, enrollment termination, and contract termination, in order
to sanction any managed care health plan in the demonstration project
that consistently or repeatedly fails to meet performance standards
provided in statute or contract.
   (11) Ensure that managed care health plans provide a mechanism for
enrollees to request a specialist or clinic as a primary care
provider. A specialist or clinic may serve as a primary care provider
if the specialist or clinic agrees to serve in a primary care
provider role and is qualified to treat the required range of
conditions of the enrollee.
   (12) Ensure that managed care health plans participating in the
demonstration project are able to provide communication access to
seniors and persons with disabilities in alternative formats or
through other methods that ensure communication, including assistive
listening systems, sign language interpreters, captioning, pad and
pencil, plain language or written translations and oral interpreters,
including for those who are limited English-proficient, or
non-English speaking, and that all managed care health plans are in
compliance with applicable cultural and linguistic requirements.
   (13) Ensure that managed care health plans participating in the
demonstration project provide access to out-of-network providers for
new individual members enrolled under this section who have an
ongoing relationship with a provider if the provider will accept the
health plan's rate for the service offered, or the applicable
Medi-Cal fee-for-service rate, whichever is higher, and the health
plan determines that the provider meets applicable professional
standards and has no disqualifying quality of care issues.
   (14) Ensure that managed care health plans participating in the
demonstration project comply with continuity of care requirements in
Section 1373.96 of the Health and Safety Code.
   (15) Ensure that the medical exemption criteria applied in
counties operating under Chapter 4.1 (commencing with Section 53800)
or Chapter 4.5 (commencing with Section 53900) of Subdivision 1 of
Division 3 of Title 22 of the California Code of Regulations are
applied to seniors and persons with disabilities served under this
section.
   (16) Ensure that managed care health plans participating in the
demonstration project take into account the behavioral health needs
of enrollees and include behavioral health services as part of the
enrollee's care management plan when appropriate.
   (17) Develop performance measures that are required as part of the
contract to provide quality indicators for the Medi-Cal population
enrolled in a managed care health plan and for the subset of
enrollees who are seniors and persons with disabilities. These
performance measures may include measures from the Healthcare
Effectiveness Data and Information Set (HEDIS) or measures indicative
of performance in serving special needs populations, such as the
National Committee for Quality Assurance (NCQA) Structure and Process
measures, or both.
   (18) Conduct medical audit reviews of participating managed care
health plans that include elements specifically related to the care
of seniors and persons with disabilities. These medical audits shall
include, but not be limited to, evaluation of the delivery model's
policies and procedures, performance in utilization management,
continuity of care, availability and accessibility, member rights,
and quality management.
   (19) Conduct financial audit reviews to ensure that a financial
statement audit is performed on managed care health plans annually
pursuant to the Generally Accepted Auditing Standards, and conduct
other risk-based audits for the purpose of detecting fraud and
irregular transactions.
   (c) Prior to exercising its authority under this section and
Section 14180, the department shall ensure that each managed care
health plan participating in the demonstration project is able to do
all of the following:
   (1) Comply with the applicable readiness evaluation criteria and
requirements set forth in paragraphs (1) to (8), inclusive, of
subdivision (b) of Section 14087.48.
   (2) Ensure and monitor an appropriate provider network, including
primary care physicians, specialists, professional, allied, and
medical supportive personnel, and an adequate number of accessible
facilities within each service area. Managed care health plans shall
maintain an updated, accurate, and accessible listing of a provider's
ability to accept new patients and shall make it available to
enrollees, at a minimum, by phone, written material, or Internet Web
site.
   (3) Assess the health care needs of beneficiaries who are seniors
or persons with disabilities and coordinate their care across all
settings, including coordination of necessary services within and,
where necessary, outside of the plan's provider network.
   (4) Ensure that the provider network and informational materials
meet the linguistic and other special needs of seniors and persons
with disabilities, including providing information in an
understandable manner in plain language, maintaining toll-free
telephone lines, and offering member or ombudsperson services.
   (5) Provide clear, timely, and fair processes for accepting and
acting upon complaints, grievances, and disenrollment requests,
including procedures for appealing decisions regarding coverage or
benefits. Each managed care health plan participating in the
demonstration project shall have a grievance process that complies
with Section 14450, and Sections 1368 and 1368.01 of the Health and
Safety Code.
   (6) Solicit stakeholder and member participation in advisory
groups for the planning and development activities related to the
provision of services for seniors and persons with disabilities.
   (7) Contract with safety net and traditional providers as defined
in subdivisions (hh) and (jj) of Section 53810, of Title 22 of the
California Code of Regulations, to ensure access to care and
services. The managed care health plan shall establish participation
standards to ensure participation and broad representation of
traditional and safety net providers within a service area.
   (8) Inform seniors and persons with disabilities of procedures for
obtaining transportation services to service sites that are offered
by the plan or are available through the Medi-Cal program.
   (9) Monitor the quality and appropriateness of care for children
with special health care needs, including children eligible for, or
enrolled in, the California Children Services Program, and seniors
and persons with disabilities.
   (10) Maintain a dedicated liaison to coordinate with each regional
center operating within the plan's service area to assist members
with developmental disabilities in understanding and accessing
services and act as a central point of contact for questions, access
and care concerns, and problem resolution.
   (11) At the time of enrollment apply the risk stratification
mechanism or algorithm described in paragraph (7) of subdivision (b)
approved by the department to determine the health risk level of
beneficiaries.
   (12) (A) Managed health care plans shall assess an enrollee's
current health risk by administering a risk assessment survey tool
approved by the department. This risk assessment survey shall be
performed within the following timeframes:
   (i) Within 45 days of plan enrollment for individuals determined
to be at higher risk pursuant to paragraph (11).
   (ii) Within 105 days of plan enrollment for individuals determined
to be at lower risk pursuant to paragraph (11).
   (B) Based on the results of the current health risk assessment,
managed care health plans shall develop individual care plans for
higher risk beneficiaries that shall include the following minimum
components:
   (i) Identification of medical care needs, including primary care,
specialty care, durable medical equipment, medications, and other
needs with a plan for care coordination as needed.
   (ii) Identification of needs and referral to appropriate community
resources and other agencies as needed for services outside the
scope of responsibility of the managed care health plan.
   (iii) Appropriate involvement of caregivers.
   (iv) Determination of timeframes for reassessment and, if
necessary, circumstances or conditions that require redetermination
of risk level.
   (13) (A) Establish medical homes to which enrollees are assigned
that include, at a minimum, all of the following elements, which
shall be considered in the provider contracting process:
   (i) A primary care physician who is the primary clinician for the
beneficiary and who provides core clinical management functions.
   (ii) Care management and care coordination for the beneficiary
across the health care system including transitions among levels of
care.
   (iii) Provision of referrals to qualified professionals, community
resources, or other agencies for services or items outside the scope
of responsibility of the managed care health plan.
   (iv) Use of clinical data to identify beneficiaries at the care
site with chronic illness or other significant health issues.
   (v) Timely preventive, acute, and chronic illness treatment in the
appropriate setting.
   (vi) Use of clinical guidelines or other evidence-based medicine
when applicable for treatment of beneficiaries' health care issues or
timing of clinical preventive services.
   (B) In implementing this section, and the terms and conditions of
the demonstration project, the department may alter the medical home
elements described in this paragraph as necessary to secure the
increased federal financial participation associated with the
provision of medical assistance in conjunction with a health home, as
made available under the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
codified in Section 1945 of Title XIX of the federal Social Security
Act. The department shall notify the appropriate policy and fiscal
committees of the Legislature of its intent to alter medical home
elements under this section at least five days in advance of taking
this action.
   (14) Perform, at a minimum, the following care management and care
coordination functions and activities for enrollees who are seniors
or persons with disabilities:
   (A) Assessment of each new enrollee's risk level and health needs
shall be conducted through a standardized risk assessment survey by
means such as telephonic, Web-based, or in-person communication or by
other means as determined by the department.
   (B) Facilitation of timely access to primary care, specialty care,
durable medical equipment, medications, and other health services
needed by the enrollee, including referrals for any physical or
cognitive barriers to access.
   (C) Active referral to community resources or other agencies for
needed services or items outside the managed care health plans
responsibilities.
   (D) Facilitating communication among the beneficiaries' health
care providers, including mental health and substance abuse providers
when appropriate.
   (E) Other activities or services needed to assist beneficiaries in
optimizing their health status, including assisting with
self-management skills or techniques, health education, and other
modalities to improve health status.
   (d) Except in a county where Medi-Cal services are provided by a
county organized health system, and notwithstanding any other
provision of law, in any county in which fewer than two existing
managed care health plans contract with the department to provide
Medi-Cal services under this chapter, the department may contract
with additional managed care health plans to provide Medi-Cal
services for seniors and persons with disabilities and other Medi-Cal
beneficiaries.
   (e) Beneficiaries enrolled in managed care health plans pursuant
to this section shall have the choice to continue an established
patient-provider relationship in a managed care health plan
participating in the demonstration project if his or her treating
provider is a primary care provider or clinic contracting with the
managed care health plan and agrees to continue to treat that
beneficiary.
   (f) The department, or as applicable, the California Medical
Assistance Commission, may contract with existing managed care health
plans to operate under the demonstration project to provide or
arrange for services under this section. Notwithstanding any other
provision of law, the department, or as applicable, the commission,
may enter into the contract without the need for a competitive bid
process or other contract proposal process, provided the managed care
health plan provides written documentation that it meets all
qualifications and requirements of this section.
   (g) This section shall be implemented only to the extent that
federal financial participation is available.
   (h) (1) The development of capitation rates for managed care
health plan contracts shall include the analysis of data specific to
the seniors and persons with disabilities population. For the
purposes of developing capitation rates for payments to managed care
health plans, the director may require managed care health plans,
including existing managed health care plans, to submit financial and
utilization data in a form, time, and substance as deemed necessary
by the department.
   (2) Notwithstanding Section 14301, the department may incorporate,
on a one-time basis for a three-year period, a risk sharing
mechanism in a contract with the local initiative health plan in the
county with the highest normalized fee-for-service risk score over
the normalized managed care risk score listed in Table 1.0 of the
Medi-Cal Acuity Study Seniors and Persons with Disabilities (SPD)
report written by Mercer Government Human Services Consulting and
dated September 28, 2010. The Legislature finds and declares that
this risk sharing mechanism will limit the risk of beneficial or
adverse effects associated with a contract to furnish services
pursuant to this section on an at-risk basis.
   (i) Persons meeting participation requirements for the Program of
All-Inclusive Care for the Elderly (PACE) pursuant to Chapter 8.75
(commencing with Section 14590), may select a PACE plan if one is
available in that county.
   (j) Persons meeting the participation requirements in effect on
January 1, 2010, for a Medi-Cal primary care case management (PCCM)
plan in operation on that date, may select that PCCM plan or a
successor health care plan that is licensed pursuant to the
Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2 of the Health and Safety
Code) to provide services within the same geographic area that the
PCCM plan served on January 1, 2010.
   (k) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement, interpret, or make specific this section
and any applicable federal waivers and state plan amendments by means
of all-county letters, plan letters, plan or provider bulletins, or
similar instructions, without taking regulatory action. Prior to
issuing any letter or similar instrument authorized pursuant to this
section, the department shall notify and consult with stakeholders,
including advocates, providers, and beneficiaries. The department
shall notify the appropriate policy and fiscal committees of the
Legislature of its intent to issue instructions under this section at
least five days in advance of the issuance.
   (l) Consistent with state law that exempts Medi-Cal managed care
contracts from Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code, and in order to achieve
maximum cost savings, the Legislature hereby determines that an
expedited contract process is necessary for contracts entered into or
amended pursuant to this section. The contracts and amendments
entered into or amended pursuant to this section shall be exempt from
Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of
the Public Contract Code and the requirements of State
Administrative Management Manual Memo 03-10. The department shall
make the terms of a contract available to the public within 30 days
of the contract's effective date.
   (m) In the event of a conflict between the terms and conditions of
the approved demonstration project, including any attachment
thereto, and any provision of this part, the terms and conditions
shall control. If the department identifies a specific provision of
this article that conflicts with a term or condition of the approved
waiver or demonstration project, or an attachment thereto, the term
or condition shall control, and the department shall so notify the
appropriate fiscal and policy committees of the Legislature within 15
business days.
   (n) In the event of a conflict between the provisions of this
article and any other provision of this part, the provisions of this
article shall control.
   (o) Any otherwise applicable provisions of this chapter, Chapter 8
(commencing with Section 14200), or Chapter 8.75 (commencing with
Section 14500) not in conflict with this article or with the terms
and conditions of the demonstration project shall apply to this
section.
   (p) To the extent that the director utilizes state plan amendments
or waivers to accomplish the purposes of this article in addition to
waivers granted under the demonstration project, the terms of the
state plan amendments or waivers shall control in the event of a
conflict with any provision of this part.
   (q) (1) Enrollment of seniors and persons with disabilities into a
managed care health plan under this section shall be accomplished
using a phased-in process to be determined by the department and
shall not commence until necessary federal approvals have been
acquired or until June 1, 2011, whichever is later.
   (2) Notwithstanding paragraph (1), and at the director's
discretion, enrollment in Los Angeles County of Seniors and persons
with disabilities may be phased-in over a 12-month period using a
geographic region method that is proposed by Los Angeles County
subject to approval by the department.
   (r) A managed care health plan established pursuant to this
section, or under the terms and conditions of the demonstration
project pursuant to Section 14180, shall be subject to, and comply
with, the requirement for submission of encounter data specified in
Section 14182.1.
   (s) (1) Commencing January 1, 2011, and until January 1, 2014, the
department shall provide the fiscal and policy committees of the
Legislature with semiannual updates regarding core activities for the
enrollment of seniors and persons with disabilities into managed
care health plans pursuant to the pilot program. The semiannual
updates shall include key milestones, progress towards the objectives
of the pilot program, relevant or necessary changes to the program,
submittal of state plan amendments to the federal Centers for
Medicare and Medicaid Services, submittal of any federal waiver
documents, and other key activities related to the mandatory
enrollment of seniors and persons with disabilities into managed care
health plans. The department shall also include updates on the
transition of individuals into managed care health plans, the health
outcomes of enrollees, the care management and coordination process,
and other information concerning the success or overall status of the
pilot program.
   (2) (A) The requirement for submitting a report imposed under
paragraph (1) is inoperative on January 1, 2015, pursuant to Section
10231.5 of the Government Code.
   (B) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government Code.
   (t) The department, in collaboration with the State Department of
Social Services and county welfare departments, shall monitor the
utilization and caseload of the In-Home Supportive Services (IHSS)
program before and during the implementation of the pilot program.
This information shall be monitored in order to identify the impact
of the pilot program on the IHSS program for the affected population.

   (u) Services under Section 14132.95 or 14132.952, or Article 7
(commencing with Section 12300) of Chapter 3 that are provided to
individuals assigned to managed care health plans under this section
shall be provided through direct hiring of personnel, contract, or
establishment of a public authority or nonprofit consortium, in
accordance with and subject to the requirements of Section 12302 or
12301.6, as applicable.
   (v) The department shall, at a minimum, monitor on a quarterly
basis the adequacy of provider networks of the managed care health
plans.
   (w) The department shall suspend new enrollment of seniors and
persons with disabilities into a managed care health plan if it
determines that the managed care health plan does not have sufficient
primary or specialty providers to meet the needs of their enrollees.

  SEC. 21.  Section 14182.1 is added to the Welfare and Institutions
Code, to read:
   14182.1.  (a) Beginning March 2011, the department shall convene a
stakeholder workgroup to review the existing encounter, claims, and
financial data submission process required by the department under
managed care health plan contracts. The workgroup members shall be
selected by the department and shall include interested
representatives from Medi-Cal managed care health plans, managed care
health plan associations, hospitals, individual health care
providers, physician groups, and consumer representatives. In
reviewing the process, the department shall consider input from the
stakeholder workgroup and develop data quality submission standards
by October 2011.
   (b) Beginning January 1, 2012, managed care health plans shall
comply with the quality submission standards developed pursuant to
subdivision (a) when submitting data to the department. The director
may impose a penalty for each month that a managed care health plan
fails to submit data in compliance with these standards. The penalty
shall be in proportion to that plan's failure to comply with the data
submission standards, as the director in his or her sole discretion
determines, and in no event shall the penalty exceed 2 percent of the
total monthly capitation rate for that plan or alternative model.
   (c) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement, interpret, or make specific this section by
means of all-county letters, plan letters, plan or provider
bulletins, or similar instructions, without taking regulatory action.
Prior to issuing any letter or similar instrument authorized
pursuant to this section, the department shall notify and consult
with stakeholders, including advocates, providers, and beneficiaries.
The department shall notify the appropriate policy and fiscal
committees of the Legislature of its intent to issue instructions
under this section at least five days in advance of the issuance. If
the department elects to adopt regulations, the adoption of
regulations shall be deemed an emergency and necessary for the
immediate preservation of
the public peace, health and safety, or general welfare.
  SEC. 22.  Section 14182.15 is added to the Welfare and Institutions
Code, to read:
   14182.15.  (a) It is the intent of the Legislature that, to the
extent that it does not jeopardize other federal funding and is
permitted by federal law, the intergovernmental transfers described
in this section provide support for the nonfederal share of
risk-based payments to managed care health plans to enable those
plans to compensate designated public hospitals in a sufficient
amount to preserve and strengthen the availability and quality of
services provided by those hospitals and their affiliated public
providers. It is further the intent of the Legislature that
transferring public entities elect to provide intergovernmental
transfers in an amount that is at least equivalent to the amount of
the nonfederal share that they would provide under fee-for-service,
as adjusted for utilization.
   (b) (1) In conjunction with the implementation of Section 14182, a
public entity may elect to transfer public funds to the state to be
used solely as the nonfederal share of Medi-Cal payments to managed
care health plans for the provision of services to Medi-Cal
beneficiaries.
   (2) For purposes of this section, "public entity" means a
designated public hospital as defined in subdivision (d) of Section
14166.1, the University of California, or a county or city and county
or local hospital authority that is licensed to operate one or more
of the designated public hospitals.
   (c) If a public entity elects to make intergovernmental transfers
pursuant to this section, all of the following shall apply:
   (1) To ensure that the implementation of Section 14182 does not
jeopardize the ability of designated public hospitals and their
affiliated public providers to continue serving Medi-Cal
beneficiaries, to the extent permitted under federal law, the
department shall require managed care health plans to pay the
designated public hospital and other governmental providers
affiliated with the transferring public entity for services rendered
to Medi-Cal beneficiaries, amounts that are no less than the amount
to which the providers would have otherwise been entitled, including
the federal and nonfederal share, on a fee-for-service basis, for the
full scope of Medi-Cal services, including supplemental payments and
any additional federally permissible amount. The payment amounts
required by this paragraph shall be based upon the volume of Medi-Cal
services provided by the designated public hospitals and other
governmental providers affiliated with the transferring public
entity.
   (2) Except as provided in Section 14105.24, to the extent that the
payments described in paragraph (1) result in increased payments by
the managed care health plans to the designated public hospitals and
other governmental providers affiliated with the transferring public
entity that are the basis of increased rates paid by the department
to the managed care health plans above the amount that would have
been paid in the absence of paragraph (1), the nonfederal share of
the increased rates shall be borne by the transferring entity as
described in subdivision (d) and there shall be no additional impact
on state General Fund expenditures. Additionally, the payment rates
shall only be paid to the extent they can be certified as actuarially
sound and as permitted under federal law.
   (d) The department shall meet and confer with the public entities
regarding their election to contribute to the nonfederal share of
federal Medicaid expenditures under this section and to determine
each public entity's intergovernmental transfer amount, which shall
be comprised of the following:
   (1) An amount that is equivalent to the nonfederal share of the
rates of compensation the public entity's designated public hospital
would receive from managed care health plans, without regard to the
requirement of paragraph (1) of subdivision (c), for Medi-Cal
inpatient days of service that otherwise would have been rendered on
a fee-for-service basis in the absence of the implementation of
Section 14182 to Medi-Cal enrollees who are seniors and persons with
disabilities.
   (2) An amount that is equivalent to the nonfederal share of the
amount which the designated public hospital and other governmental
providers affiliated with the transferring entity would have
otherwise incurred on a fee-for-service basis for providing Medi-Cal
services to the Medi-Cal managed care health plan enrollees they
serve, including supplemental payments, excluding the nonfederal
share of those amounts the plan will pay for the services without
regard to the requirement of paragraph (1) of subdivision (c), and
consistent with Section 14105.24, to the extent otherwise applicable.

   (3) Amounts equivalent to the nonfederal share of additional
federally permissible payments.
   (e) Prior to accepting the transfer amounts from a public entity
determined under subdivision (d), the department shall ensure that
its contracts with the applicable managed care health plans and the
contracts between the managed care health plans and the public
entities require, to the extent permitted under federal law, that the
managed care health plans pay the designated public hospitals, and
other governmental providers affiliated with the transferring
entities, amounts that are in furtherance of the intent of this
section as described in subdivision (a) and consistent with what the
designated public hospital and other governmental providers
affiliated with the transferring public entity would have received
through fee-for-service, and that the payment amounts meet the
requirement of paragraph (1) of subdivision (c).
   (f) The department shall obtain federal approvals or waivers as
necessary to implement this section and to obtain federal matching
funds to the maximum extent permitted by federal law.
   (g) Participation in intergovernmental transfers under this
section is voluntary on the part of the transferring entity for
purposes of all applicable federal laws. As part of its voluntary
participation in the nonfederal share of payments under this section
by means of intergovernmental transfers, the transferring entity
agrees to reimburse the state for the nonfederal share of state
staffing or administrative costs directly attributable to
implementation of this section. This section shall be implemented
only to the extent federal financial participation is not
jeopardized.
  SEC. 23.  Section 14182.2 is added to the Welfare and Institutions
Code, to read:
   14182.2.  (a) Notwithstanding Section 14094.3, in furtherance of
the waiver or demonstration project developed pursuant to Section
14180, the director shall establish, by January 1, 2012, organized
health care delivery models for children eligible for California
Children Services (CCS) under Article 5 (commencing with Section
123800) of Chapter 3 of Part 2 of Division 106 of the Health and
Safety Code. These models shall be chosen from the following:
   (1) An enhanced primary care case management program.
   (2) A provider-based accountable care organization.
   (3) A specialty health care plan.
   (4) A Medi-Cal managed care plan that includes payment and
coverage for CCS-eligible conditions.
   (b) Each model shall do all of the following:
   (1) Establish clear standards and criteria for participation,
exemption, enrollment, and disenrollment.
   (2) Provide care coordination that links children and youth with
special health care needs with appropriate services and resources in
a coordinated manner to achieve optimum health.
   (3) Establish networks that include CCS-approved providers and
maintain the current system of regionalized pediatric specialty and
subspecialty services to ensure that children and youth have timely
access to appropriate and qualified providers.
   (4) Coordinate out-of-network access if appropriate and qualified
providers are not part of the network or in the region.
   (5) Ensure that children enrolled in the model receive care for
their CCS-eligible medical conditions from CCS-approved providers
consistent with the CCS standards of care.
   (6) Participate in a statewide quality improvement collaborative
that includes stakeholders.
   (7) (A) Establish and support medical homes, incorporating all of
the following principles:
   (i) Each child has a personal physician.
   (ii) The medical home is a physician-directed medical practice.
   (iii) The medical home utilizes a whole child orientation.
   (iv) Care is coordinated or integrated across all of the elements
of the health care system and the family and child's community.
   (v) Information, education, and support to consumers and families
in the program is provided in a culturally competent manner.
   (vi) Quality and safety practices and measures.
   (vii) Provides enhanced access to care, including access to
after-hours care.
   (viii) Payment is structured appropriately to recognize the added
value provided to children and their families.
   (B) In implementing this section, and the terms and conditions of
the demonstration project, the department may alter the medical home
principles described in this paragraph as necessary to secure the
increased federal financial participation associated with the
provision of medical assistance in conjunction with a health home, as
made available under the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
codified in Section 1945 of Title XIX of the federal Social Security
Act. The department shall notify the appropriate policy and fiscal
committees of the Legislature of its intent to alter medical home
principles under this section at least five days in advance of taking
this action.
   (8) Provide the department with data for quality monitoring and
improvement measures, as determined necessary by the department. The
department shall institute quality monitoring and improvement
measures that are appropriate for children and youth with special
health care needs.
   (c) The services provided under these models shall not be limited
to medically necessary services required to treat the CCS-eligible
medical condition.
   (d) Notwithstanding any other provision of law, and to the extent
permitted by federal law, the department may require eligible
individuals to enroll in these models.
   (e) At the election of the Managed Risk Medical Insurance Board,
and with the consent of the director, children enrolled in the
Healthy Families Program pursuant to Part 6.2 (commencing with
Section 12693) of Division 2 of the Insurance Code, who are eligible
for CCS under Article 5 (commencing with Section 123800) of Chapter 3
of Part 2 of Division 106 of the Health and Safety Code, may enroll
in the organized health care delivery models established under this
section.
   (f) For the purposes of implementing this section, the department
shall seek proposals to establish and test these models of organized
health care delivery systems, may enter into exclusive or
nonexclusive contracts on a bid or negotiated basis, and may amend
existing managed care contracts to provide or arrange for services
under this section. Contracts may be statewide or on a more limited
geographic basis. Contracts entered into or amended under this
section shall be exempt from the provisions of Chapter 2 (commencing
with Section 10290) of Part 2 of Division 2 of the Public Contract
Code and Chapter 6 (commencing with Section 14825) of Part 5.5 of
Division 3 of the Government Code.
   (g) (1) Entities contracting with the department under this
section shall report expenditures for the services provided under the
contract.
   (2) If a contractor is paid according to a capitated or risk-based
payment methodology, the rates shall be actuarially sound and take
into account care coordination activities.
   (h) (1) The department shall conduct an evaluation to assess the
effectiveness of each model in improving the delivery of health care
services for children who are eligible for CCS. The department shall
consult with stakeholders in developing an evaluation for the models
being tested.
   (2) The evaluation process shall begin simultaneously with the
development and implementation of the model delivery systems to
compare the care provided to, and outcomes of, children enrolled in
the models with those not enrolled in the models. The evaluation
shall include, at a minimum, an assessment of all of the following:
   (A) The types of services and expenditures for services.
   (B) Improvement in the coordination of care for children.
   (C) Improvement in the quality of care.
   (D) Improvement in the value of care provided.
   (E) The rate of growth of expenditures.
   (F) Parent satisfaction.
   (i) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement, interpret, or make specific this section
and any applicable federal waivers and state plan amendments by means
of all-county letters, plan letters, plan or provider bulletins, or
similar instructions, without taking regulatory action. Prior to
issuing any letter or similar instrument authorized pursuant to this
section, the department shall notify and consult with stakeholders,
including advocates, providers, and beneficiaries. The department
shall notify the appropriate policy and fiscal committees of the
Legislature of its intent to issue instructions under this section at
least five days in advance of the issuance.
  SEC. 24.  Section 14182.3 is added to the Welfare and Institutions
Code, to read:
   14182.3.  (a) To the extent the provisions of Article 5.2
(commencing with Section 14166) do not conflict with the provisions
of this article or the terms and conditions of the new demonstration
project created under this article, the provisions of Article 5.2
(commencing with Section 14166) shall continue to apply to the new
demonstration project.
   (b) In the event of a conflict between any provision of this
article and the special terms and conditions required by the federal
Centers for Medicare and Medicaid Services for the approval of the
demonstration project described in Section 14180, the special terms
and conditions shall control.
   (c) (1) Under the demonstration project described in Section
14180, the state shall have priority to claim against and retain the
first five hundred million dollars ($500,000,000) in federal funds
using expenditures incurred under state-only programs or other
programs for which the state is authorized to claim under the terms
and conditions of the demonstration project.
   (2) Notwithstanding paragraph (1), if the director determines that
the amount of base funding available under the demonstration project
described in Section 14180 is less than the six hundred eighty-one
million six hundred forty thousand dollars ($681,640,000) available
to public hospitals under the original demonstration project, the
state may reallocate an amount from the five hundred million dollars
($500,000,000) described in paragraph (1) to increase the amount of
base funding under the new demonstration project to six hundred
eighty one million six hundred forty thousand dollars ($681,640,000).

   (3) For purposes of this section, the term "base funding" includes
funding for the safety net care pool or a similar pool or fund for
health coverage expansion, and for an investment, incentive, or
similar pool, but shall not include funds made available to hospitals
or counties for inpatient or outpatient Medi-Cal reimbursements,
expansion of managed care for seniors and persons with disabilities,
or other expansions of systems of care for individuals who are
eligible under the Medi-Cal state plan.
   (d) The director shall have authority to maximize available
federal financial participation under the demonstration project
described in Section 14180, including, but not limited to,
authorizing the use of intergovernmental transfers by district
hospitals that are not reimbursed under a contract negotiated
pursuant to the Selective Provider Contracting Program, to fund the
nonfederal share of expenditures to the extent permitted by the terms
and conditions of the demonstration project.
   (e) Participation in intergovernmental transfers under this
section is voluntary on the part of the transferring entity for
purposes of all applicable federal laws. As part of its voluntary
participation in the nonfederal share of payments under this
subdivision by means of intergovernmental transfers, the transferring
entity agrees to reimburse the state for the nonfederal share of
state staffing or administrative costs directly attributable to the
state's implementation of these voluntary intergovernmental
transfers. This subdivision shall be implemented only to the extent
federal financial participation is not jeopardized.
   (f) Notwithstanding the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, the department may clarify, interpret, or
implement the provisions of this section by means of provider
bulletins or similar instructions. The department shall notify the
fiscal and appropriate policy committees of the Legislature of its
intent to issue instructions under this section at least five days in
advance of the issuance.
  SEC. 25.  Section 14182.4 is added to the Welfare and Institutions
Code, to read:
   14182.4.  (a) To the extent authorized under a federal waiver or
demonstration project described in Section 14180 that is approved by
the federal Centers for Medicare and Medicaid Services, the
department shall establish a program of investment, improvement, and
incentive payments for designated public hospitals to encourage and
incentivize delivery system transformation and innovation in
preparation for the implementation of federal health care reform.
   (b) The Public Hospital Investment, Improvement, and Incentive
Fund is hereby established in the State Treasury. Notwithstanding
Section 13340 of the Government Code, moneys in the fund shall be
continuously appropriated, without regard to fiscal years, to the
department for the purposes specified in this section.
   (c) The fund shall consist of any moneys that a county, other
political subdivision of the state, or other governmental entity in
the state that may elect to transfer to the department for deposit
into the fund, as permitted under Section 433.51 of Title 42 of the
Code of Federal Regulations or any other applicable federal Medicaid
laws.
   (d) Moneys in the fund shall be used as the source for the
nonfederal share of investment, improvement, and incentive payments
as authorized under a federal waiver or demonstration project to
participating designated public hospitals defined in subdivision (d)
of Section 14166.1, and the governmental entities with which they are
affiliated, that provide the intergovernmental transfers for deposit
into the fund.
   (e) The department shall obtain federal financial participation
for moneys in the fund to the full extent permitted by law. Moneys
shall be allocated from the fund by the department and matched by
federal funds in accordance with the terms and conditions of the
waiver or demonstration project. The moneys disbursed from the fund,
and all associated federal financial participation, shall be
distributed solely to the designated public hospitals and the
governmental entities with which they are affiliated.
   (f) Participation under this section is voluntary on the part of
the county or other political subdivision for purposes of all
applicable federal laws. As part of its voluntary participation in
the nonfederal share of payments under this section, the county or
other political subdivision agrees to reimburse the state for the
nonfederal share of state staffing or administrative costs directly
attributable to implementation of this section. This section shall be
implemented only to the extent federal financial participation is
not jeopardized.
   (g) Notwithstanding the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, the department may clarify, interpret, or
implement the provisions of this section by means of provider
bulletins or similar instructions. The department shall notify the
fiscal and appropriate policy committees of the Legislature of its
intent to issue instructions under this section at least five days in
advance of the issuance.
  SEC. 26.  The Legislature finds and declares all of the following:
   (a) The Legislature continues to recognize the essential role that
safety net hospitals play in serving the state's most vulnerable
populations, including Medi-Cal beneficiaries and the uninsured. To
that end, it has been, and remains, the intent of the Legislature to
preserve funding for, and to support, the entire hospital safety net
and to obtain all available federal funds for all hospitals.
   (b) Recent federal health care reform measures provide, among
other things, various programs and funding to expand access to care.
These measures will result in numerous policy changes intended to
improve delivery of care, achieve greater efficiencies, and increase
the accountability and risk borne by hospitals. Payers may include
payment incentives and disincentives that are designed to move
towards risk-based models to achieve greater effectiveness and
efficiencies in delivering health care services.
   (c) It is the intent of the Legislature that funding provided to
designated public hospitals, private disproportionate share
hospitals, and nondesignated public hospitals, through a future
hospital quality assurance fee and under a new waiver, is implemented
with the goals of creating balance and equity among these hospital
groups and increasing access to care. It is also the intent of the
Legislature to maximize federal funds with the goal of providing
predictable and stable funding to all hospitals to improve their
financial viability and provide access to health care services.
Hospitals must have sufficient resources to provide more efficient
care through the use of various delivery models and achieving other
health care reform goals.
   (d) It is the intent of the Legislature that the elements
addressing balance and equity among the hospital groups include all
of the following:
   (1) Measurement of the achievement of acceptable levels of the
respective Medi-Cal federal upper payment limits.
   (2) Measurement of uncompensated and undercompensated care.
   (3) Consideration of the source and potential risks of the
nonfederal share.
   (4) Consideration of the requirements associated with particular
funding sources, including whether funding is risk-based.
   (5) Consideration of the services that are included in the current
waiver pursuant to Article 5.2 (commencing with Section 14166) of
Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code.
   (6) With respect to the state fiscal year of the demonstration
beginning on July 1, 2011, and periodically thereafter, additional
reevaluations shall be considered by the State Department of Health
Care Services, in consultation with the hospital community, to
determine if there has been a significant change in state or federal
Medicaid policy or reimbursement to safety net hospitals resulting in
a loss of balance equity among and between the hospitals. The
department shall report to the Legislature the findings of any
reevaluations it elects to conduct, including proposed changes to the
distribution structure no more than once each state fiscal year.
   (e) Achievement of balance and equity among the hospital groups is
necessary to address all of the following:
   (1) Maintaining and expanding access through improved Medi-Cal
reimbursement and reducing the uncompensated cost burden for the
uninsured borne by safety net hospitals.
   (2) The need to support safety net hospitals in advance of health
care reform implementation in California.
   (3) The goal of providing longer term stability to safety net
hospitals.
   (f) Given the ongoing negotiations with the federal Centers for
Medicare and Medicaid Services on a new Section 1115 Medicaid waiver,
the development of the specific mechanisms to achieve the stated
goals of this section requires future legislation.
  SEC. 27.  This act shall become operative only if Assembly Bill 342
of the 2009-10 Regular Session of the Legislature is enacted.
  SEC. 28.  This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
   In order to make changes to state funded health care programs at
the earliest possible time, it is necessary that this act take effect
immediately.